Cost Behavior Cover to Cover Company is a manufacturer of shelving for books. The company has compiled the following cost data, and wants your help in determining the cost behavior. After reviewing the data, complete requirements (1) and (2) that follow Units Produced 5,000 shelves $55,000 $7,750 Total Total Total Machine Lumber Utilities Depreciation Cost Cost Cost $140,000 10,000 shelves 110,000 13,500 140,000 20,000 shelves 220,000 25,000 shelves 275,000 25,000 30,750 140,000 140,000 1. Determine whether the costs in the table are variable, fixed, mixed, or none of these. Lumber Uuites Depreciation 2. For each cost, determine the fleed portion of the cost, and the per-unit variable cust. If there is no amount or an amount is zero, enter "0". Recall that, for N Number of Units Produced, Total Costs (Variable Cost Per Unit x N)+Fixed Cost. Complete the following table with your answers Round variable portion of cost (per unit) answers to two decimal places. Fixed Portion Variable Portion Cost of Cost of Cost (per Unit) Lumber Utilities Depreciation High-Low Fles Company is the chief competitor of Cover-to-Cover Company in the bookshelf business. Bible Files is analyzing its manufacturing costs, and has complied the following data for the first six months of the year After reviewing the data, answer questions (1) through (3) that follow. Units Produced Total Cost January 4,360 units $65,600 February 275 6.250 March 1,000 15,000 4,775 96,250 May June 1,750 3,015 32,500 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 a Number of Units Produced) + Fixed Cost Complete the following table. Total Fixed Cost Variable Cost per Unit 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 Cost 3,500 4,360 4,775 3. Why does the total cost computed for 4,360 units not match the data for January? The high-low method is accurate only for months in which production is at full capacity. b. The high-low method only gives accurate data when fixed costs are zero. c. The high-low method gives a formule for the estimated total cost and may not match levels of production other than the highest and lowest. e. The high-low method gives accurate data only for levels of production outside the relevant range, Contribution Margin Review the caution 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 ceme statements. Each company sold 8200 units during the year Cover-to-Cover Company Biblio Files Company Contribution margin (percent) Unit contribution margin Break even sales (units) break-even sales (dollars) Income Statement - Cover-to-Cover Sales Cover-to-Cover Company Contribution Margin Income Statement For the Year Ended December 31, 20Y8 $414,000 Variable costs: Manufacturing expense $248,400 Selling expense 20,700 Administrative expense 62,100 (331,200) Contribution margin $82,800 Fixed costs: Manufacturing expense $5,000 Selling expense 4,000 Administrative expense 11,700 (20,700) Operating income $62,100 Income Statement - Biblio Files Sales Biblio Files Company Contribution Margin Income Statement For the Year Ended December 31, 2018 $414,000 Variable costs: Manufacturing expense $165,600 Selling expense 16,560 Administrative expense 66,240 (248,400) Contribution margin $165,600 Fixed costs: Manufacturing expense $85,500 Selling expense 8,000 Administrative expense 10,000 (103,500) Operating income $62,100 Sales Mix Bolio 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 per Unit Bookshelf Basic Deluxe 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. Foxed costs for the upcoming year are estimated at $337,260. Recall that the totals of all the sales mix percents must be 100%. Determine the amounts to complete the following table. Type of Bookshelf Percent of Sales Mix Break-Even Sales Break-Even Sales in Units in Dollars Basic Deluxe 100 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.