Task: Contribution Margin and Functional Income Statements
The following information is available for Dabney Company for 2006:
Sales revenue (at $20 per unit) $151,200
Fixed manufacturing costs 24,000
Variable manufacturing costs (at $8 per unit) 60,480
Fixed selling expenses 70,000
Variable selling expenses (at $2 per unit) 15,120
Required:
1. Prepare a contribution margin income statement.
2. Prepare a functional income statement.
3. Calculate the number of units sold.
4. Calculate the contribution margin per unit.
5. Interpretive Question: Why is a knowledge of the contribution margin more useful than a knowledge of the markup per unit when management has to make a decision about profitability?