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 determing the cost behavior After reviewing the data, complete requirements (1) and (2) that follow Units Produced 7,000 shelves Total Lumber Cost 584,000 Total Utilities Cost $9,050 Total Machine Depreciation Cost $125,000 14,000 shelves 168,000 17,100 125.000 28,000 shelves 125.000 336,000 420,000 33,200 41.250 35,000 shelves 125,000 1. Determine whether the costs in the table are variable fixed med or none of these Variable Cost Fixed Cost Mixed Cost None of these Lumber Ubites OOO Depreciation Biblio Files Company is the chief competitor of Cover-to-Cover Company in the booksheir business. Belio Fles is analyzing ts 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 Total Cost January $65,600 6.250 February Number of Units Produced 4,360 225 1.000 5,475 1,750 March 15,000 April 111.250 32.500 May June 3.015 48,000 1. From the data previously provided help Biblo Files Company estimate te lyed and variable portions of its total costs coing the high low method Recal trane Tore Costs = (Variable Cost Per Unitx Number of Units Produced) Fored Cost Complete the following table Total Fixed Cost Variable Cost per Unit 2 with your Total Foxed 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 5 4,360 5,475 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-ow method gives a formula for the estimated total cost ah may not match devels of production other than the highest and lowest The high-low method gives accurate data only for levels of production outside the relevantnog The high-low method accurate data when fixed costs are zero The high-low method is accurate only for months in which production is a full capacity Contribution Margin Review the contribution maron income statements for Cover to Cover Company and Biblo Files Company on their respective Income Statements parets Complete the following table from the data provided in the income statements. Each company sold 64,000 unts during the year Biblio Files Company % Cover-to-Cover Company Contribution margin ratio (percent) Unit contribution margin $ Break even sales (units) Break-even sales (dollars) $ S v Cover-to-Cover Company Contribution Margin Income Statement For the Year Ended December 31, 2017 1 Sales $424.000.00 2 Variable costs: $254.400.00 Manufacturing expense 4 Selling expense 21.200.00 Administrative expense 63,600.00 339,200.00 y Contribution margin 584,800.00 Fixed costs: 55.000.00 Manufacturing expense 4.000.00 Selling expense 12, 200,00 21.200,00 10 Administrative expense 563.600.00 11 Income from operations Income Statement-Biblio Files Biblio Files Company Contribution Margin Income Statement For the Year Ended December 31, 2017 1 Sales 5424,000.00 2 Variable costs: 3 $169.600.00 Manufacturing expense 4 Selling expense 16.960.00 5 Administrative expense 67,840.00 254,400.00 N 6 Contribution margin $169,600,00 7 Fixed costs: 588.000.00 Manufacturing expense Selling expense 8.000.00 5 10,000.00 106,000.00 10 Administrative expense $63.600.00 10 Income from operations Sales Mix Biblio es company is making plans for its next fiscal year, and decides to sell wo new types of bookshelves, Basic and Deluxe The company has compiled the following estimates for the new product offerings Type of Bookshelt Basic Sales Price per Unit 55.00 Variable Cost per Unit $175 Deluxe 9.00 3.10 The company is interested in determining how many of each type of bookshell would have to be sold in order to break even if we think of the Basc and Deluxe products as components of one overall enterprise product called "Combined the unt contribution margin for the Combined product would be $2.3t Fixed costs for the upcoming year are estimated at $346.962 Recal that mo fotos of all the percent must be 100% Determine the amounts to complete the following Tab Type of Bookshell Percent of Sales Mix Break-Even Sales in Units Break Even Sales in Dollars Basic Deluxe Target Profit Target Profit Refer again to the income statements for Cover-to-Cover Company and Biblio Files Company on the respective Income Statement panels. 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 $20,000 in the coming year, what must their amount of sales be? 5 2. If Biblio Files Company wants to increase its profit by $20,000 in the coming year, what must their amount of sales be? 3. What would explain the difference between your answers for (1) and (2) The companies have goals that are not in the relevant range Cover-to-Cover Company's contribution margin ratio is lower meaning that it's more efficient in its operations The answers are not different each company has the same required sates amount for the coming year to achieve the desired target profit Biblio Files Company has a higber contribution margin ratio, and so more of each sales dollar is available to cover fixed costs and provide income from operations 1 Determine whether the costs in the table are variabi. Best ed or none of these Variable Cost Fixed Cost Mixed Cost None de these Lumber Utities OO Depreciation 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 Recame for N= Number of Units Produced Total Costs = (Variable Cost Per Unit X N). Fwed Cost Complete the following table with your answers, Cost Fixed Portion of Cost Variable Portion of Cost (per Unit) Lumber $ S Utilities Depreciation Previous Next