Contribution Margin Review the contribution margin income statements for Cover-to-Cover Company and Biblio Files Company on their respective Income Statements. Complete the following table from the data provided on the income statements. Each company sold 76,800 units during the year. Contribution margin ratio (percent) Unit contribution margin Break-even sales (units) Break-even sales (dollars) Income Statement - Cover-to-Cover Cover-to-Cover Company Biblio Files Company % % $ Cover-to-Cover Company Contribution Margin Income Statement For the Year Ended December 31, 20Y8 Sales $384,000 Variable costs: Manufacturing expense $230,400 Selling expense 19,200 Administrative expense 57,600 (307,200) $ Previous Next Variable costs: Manufacturing expense $230,400 Selling expense 19,200 Administrative expense 57,600 (307,200) Contribution margin $76,800 Fixed costs: Manufacturing expense $5,000 Selling expense 4,000 Administrative expense 10,200 (19,200) Operating income $57,600 Income Statement - Biblio Files Biblio Files Company Contribution Margin Income Statement For the Year Ended December 31, 20Y8 Sales $384,000 Variable costs: Manufacturing expense $153,600 Selling expense 15,360 Administrative expense 61,440 (230,400) Contribution margin $153,600 Sales $384,000 Variable costs: Manufacturing expense $153,600 Selling expense 15,360 Administrative expense 61,440 (230,400) Contribution margin $153,600 Fixed costs: Manufacturing expense $78,000 Selling expense 8,000 Administrative expense 10,000 Operating income (96,000) $57,600 Sales Mix Biblio Files Company is making plans for its next fiscal year, and decides to sell two new types of bookshelves, Basic and Deluxe. The company has compiled the following estimates for the new product offerings. Type of Bookshelf Basic Deluxe Sales Price per Unit Variable Cost per Unit $5.00 9.00 $1.75 8.10 The company is interested in determining how many of each type of bookshelf would have to be sold in order to break even. If we think of the Basic and Deluxe products as components of one overall enterprise product called "Combined," the unit contribution margin for the Combined product would be $2.31. Fixed costs for the upcoming year are estimated at $330,330. Recall that the Previous Next The company is interested in determining how many of each type of bookshelf would have to be sold in order to break even. If we think of the Basic and Deluxe products as components of one overall enterprise product called "Combined," the unit contribution margin for the Combined product would be $2.31. Fixed costs for the upcoming year are estimated at $330,330. Recall that the totals of all the sales mix percents must be 100%. Determine the amounts to complete the following table. Type of Bookshelf Basic Deluxe Percent of Sales Mix Break-Even Sales in Units Break-Even Sales in Dollars 20% 40% 484,000 434,000 $ 50,000 50,000 Target Profit Refer again to the income statements for Cover-to-Cover Company and Biblio Files Company on their respective Income Statement. Note that both companies have the same sales and net income. Answer questions (1) - (3) that follow, assuming that all data for the coming year is the same as the current year, except for the amount of sales. 1. If Cover-to-Cover Company wants to increase its profit by $40,000 in the coming year, what must their amount of sales be? 2. If Biblio Files Company wants to increase its profit by $40,000 in the coming year, what must their amount of sales be? 3. What would explain the difference between your answers for (1) and (2)? a. Biblio Files Company has a higher contribution margin ratio, and so more of each sales dollar is available to cover fixed costs and provide operating income. b. Cover-to-Cover Company's contribution margin ratio is lower, meaning that it's more efficient in its operations. c. The companies have goals that are not in the relevant range. d. The answers are not different; each company has the same required sales amount for the coming year to achieve the desired target profit