Biblio Files Company is the chief competitor of Cover-to-Cover Company in the bookshelf business. Biblio Files is analyzing its manufacturing costs, and has compiled the following data for the first six months of the year. After reviewing the data, answer questions (1) through (3) that follow.

Month	Number of Units Produced	Total Cost
January	4,360	$65,600
February	250	6,250
March	1,000	15,000
April	5,250	56,250
May	1,750	32,500
June	3,015	48,000

1. From the data previously provided, help Biblio Files Company estimate the fixed and variable portions of its total costs using the High-Low Method. Recall that Total Costs = (Variable Cost Per Unit x Number of Units Produced) + Fixed Cost. Complete the following table.

Total Fixed Cost	Variable Cost per Unit

Points:

2 / 2

2. With your Total Fixed Cost and Variable Cost per Unit from the High-Low Method, compute the total cost for the following values of N (Number of Units Produced).

Number of Units Produced	Total Costs
3,500
4,360
5,250

Points:

0 / 3

3. Why does the total cost computed for 4,360 units not match the data for January in the table at the top of this panel?

The High-Low method only gives accurate data when fixed costs are zero.

The High-Low method is accurate only for months in which production is at full capacity.

The High-Low method gives accurate data only for levels of production outside the relevant range.

The High-Low method gives a formula for the estimated total cost and may not match levels of production other than the highest and lowest.

Points:

0 / 1

Feedback

Check My Work

Review the High-Low method, and use the smallest and largest levels of production in your computation.

Contribution Margin

Shaded cells have feedback.

Review the contribution margin income statements for Cover-to-Cover Company and Biblio Files Company on their respective Income Statements panels. Complete the following table from the data provided in the income statements. Each company sold 84,800 units during the year.

	Cover-to-Cover Company	Biblio Files Company
Contribution margin ratio (percent)
Unit contribution margin
Break-even sales (units)
Break-even sales (dollars)

Review the definitions of contribution margin ratio and unit contribution margin. Also review the formulas for break-even in terms of units sold and sales dollars.