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. Total Total Total Machine Units Lumber Utilities Depreciation Produced Cost Cost Cost 15,000 shelves $180,000 $19,250 $140,000 30,000 shelves 360,000 36,500 140,000 60,000 shelves 720,000 71,000 140,000 75,000 shelves 900,000 88,250 140,000 1. Determine whether the costs in the table are variable, fixed, mixed, or none of these Lumber Variable Cost Utilities Mixed Cost Depreciation Fixed Cost 2. For each cost, determine the fixed portion of the cost, and the per unit variable cost. If there is no amount or an amount is zero, enter "o". 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 12 Utilities Depreciation High-Low 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 th 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 300 6,250 March 1,000 15,000 April 8,800 133,750 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 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 8.800 3. Why does the total cost computed for 4,360 units not match the data for January? a. 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 formula for the estimated total cost and may not match levels of production other than the highest and lowest d. The high-low method gives accurate data only for levels of production outside the relevant range. Contribution Margin Review the contribution margin income statements for Cover-to-Cover Company and Biblio Files Company on their respective Income Statements. Complete th table from the data provided on the income statements. Each company sold 78,800 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)
