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 75,800 units during the year. Cover-to-Cover Biblio Files Company Company Contribution margin ratio (percent) Unit contribution margin Break-even sales (units) Break-even sales (dollars) % % S 18,950 Income Statement - Cover-to-Cover Cover-to-Cover Company Contribution Margin Income Statement For the Year Ended December 31, 2048 Sales $379,000 Variable costs: Manufacturing expense $227,400 Selling expense Administrative expense 56,850 (303,200) Contribution margin $75,800 Fixed costs: Manufacturing expense $5,000 Selling expense Administrative expense (18,950) Operating income 556,850 Income Statement - Biblio Files Biblio Files Company Contribution Margin Income Statement For the Year Ended December 31, 2048 Sales $379,000 4,000 9,950 $151,600 Variable costs: Manufacturing expense Selling expense Administrative expense Contribution margin 15,160 60,640 (227,400) 5151,600 $76,750 10,000 Manufacturing expense Selling expense 8,000 Administrative expense (94,750) Operating income 556,850 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 Sales Price Variable Cost Bookshelf per Unit per Unit Basic $5.00 $1.75 Deluxe 9.00 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 $345,500. Recall that the totals of all the sales mix percents must be 100%. Determine the amounts to complete the following table. Type of Percent of Break-Even Sales Break-Even Sales Bookshelf Sales Mix in Dollars in Units Basic % Deluxe % 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 $30,000 in the coming year, what must their amount of sales be? 2. If Biblio Files Company wants to increase its profit by $30,000 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