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 Total Lumber Cost Total Utilities Cost Total Machine Depreciation Cost 14,000 shelves $154,000 $17,100 $130,000 28,000 shelves 308,000 33,200 130,000 56,000 shelves 616,000 65,400 130,000 70,000 shelves 770,000 81,500 130,000 1. Determine whether the costs in the table are variable, fixed, mixed, or none of these. Lumber Utilities 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 "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. Cost Fixed Portion of Cost Variable Portion of Cost (per Unit) Lumber $fill in the blank bb827cfe9032faa_4 $fill in the blank bb827cfe9032faa_5 Utilities fill in the blank bb827cfe9032faa_6 fill in the blank bb827cfe9032faa_7 Depreciation fill in the blank bb827cfe9032faa_8 fill in the blank bb827cfe9032faa_9 Question Content Area 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 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 April 8,775 176,250 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 $fill in the blank 52f60ffa007c015_1 $fill in the blank 52f60ffa007c015_2 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 $fill in the blank 52f60ffa007c015_3 4,360 fill in the blank 52f60ffa007c015_4 8,775 fill in the blank 52f60ffa007c015_5 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. Question Content Area 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 84,800 units during the year. Cover-to-Cover Company Biblio Files Company Contribution margin ratio (percent) fill in the blank 701d10038016ff4_1 % fill in the blank 701d10038016ff4_2 % Unit contribution margin $fill in the blank 701d10038016ff4_3 $fill in the blank 701d10038016ff4_4 Break-even sales (units) fill in the blank 701d10038016ff4_5 fill in the blank 701d10038016ff4_6 Break-even sales (dollars) $fill in the blank 701d10038016ff4_7 $fill in the blank 701d10038016ff4_8 Question Content Area Income Statement - Cover-to-Cover Cover-to-Cover Company Contribution Margin Income Statement For the Year Ended December 31, 20Y8 Sales $424,000 Variable costs: Manufacturing expense $254,400 Selling expense 21,200 Administrative expense 63,600 (339,200) Contribution margin $84,800 Fixed costs: Manufacturing expense $5,000 Selling expense 4,000 Administrative expense 12,200 (21,200) Operating income $63,600 Income Statement - Biblio Files Biblio Files Company Contribution Margin Income Statement For the Year Ended December 31, 20Y8 Sales $424,000 Variable costs: Manufacturing expense $169,600 Selling expense 16,960 Administrative expense 67,840 (254,400) Contribution margin $169,600 Fixed costs: Manufacturing expense $88,000 Selling expense 8,000 Administrative expense 10,000 (106,000) Operating income $63,600 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 Sales Price per Unit Variable Cost 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 $328,020. 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 in Units Break-Even Sales in Dollars Basic fill in the blank 725957fe1f9cff0_1 % fill in the blank 725957fe1f9cff0_2 $fill in the blank 725957fe1f9cff0_3 Deluxe fill in the blank 725957fe1f9cff0_4 % fill in the blank 725957fe1f9cff0_5 $fill in the blank 725957fe1f9cff0_6 Question Content Area 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 $20,000 in the coming year, what must their amount of sales be? $fill in the blank b5454af2fffc040_1 2. If Biblio Files Company wants to increase its profit by $20,000 in the coming year, what must their amount of sales be? $fill in the blank b5454af2fffc040_2 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 Companys contribution margin ratio is lower, meaning that its 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.