Module+5000+example-Contribution-Margin-Based+Income+Statement

Rollt Tide T-Shirts, Inc. will produce 50,000 T-shirts at $15 each in the coming year. The Follwing costs are included:
 * __How to Create a Contribution margin based income statement__**

Direct material per shirt $3 Direct labor per shirt $2 Variable overhead per shirt $1 Total Fixed factory overhead $200,000

Fixed Selling and Administrative costs are $100,000

Calculate: a)Variable product cost b)Selling expense per unit c)Total variable cost per unit d)Contribution margin per unit e)Prepare a contribution marigin based income statement

Solution: a) Variable product cost per unit = Direct Labor + Direct materials + Variable overhead = $2+$3+$1 = $6 b) Selling expense per unit = Selling expense/number of units = $100,000/50,000 = $2 c) Total variable cost per unit = Direct materials + Direct labor + Variable overhead = $3+$2+$1 = $6 d) Contribution Margin per unit = Price - Variable cost per unit = $15-$8 = $7 e) _____ __--Roll Tide T-shirts, Inc.-__ __Contribution-Margin-Based Income Statement__ __--For the coming year---__ _ Sales ($15 X 50,000 T-shirts) --- $750,000 $15 Total Variable expenses: ($6 X 50,000)__300,000$6__ Total Contribution Margin--$450,000-- __$8__ Total Fixed expenses--- __100,000__ Operating income-__$350,000__ ___
 * ---Total Per-- Unit**