Cover-to-Cover Company

Contribution Margin Income Statement

For the Year Ended December 31

1

Sales

$424,000.00

2

Variable costs:

3

Manufacturing

$233,200.00

4

Selling

21,200.00

5

Administrative

63,600.00

318,000.00

6

Contribution margin

$106,000.00

7

Fixed costs:

8

Manufacturing

$5,000.00

9

Selling

4,000.00

10

Administrative

33,400.00

42,400.00

11

Income from operations

$63,600.00

Biblio Files Company

Contribution Margin Income Statement

For the Year Ended December 31

1	Sales			$424,000.00
2	Variable costs:
3	Manufacturing		$169,600.00
4	Selling		16,960.00
5	Administrative		67,840.00	254,400.00
6	Contribution margin			$169,600.00
7	Fixed costs:
8	Manufacturing		$88,000.00
9	Selling		8,000.00
10	Administrative		10,000.00	106,000.00
11	Income from operations			$63,600.00 Refer again to the income statements for Cover-to-Cover Company and Biblio Files Company on their 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. If required, round answers to the nearest dollar. 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? Points: 1 / 1 Feedback Check My Work Examine the differences between the two companies, including the differences in elements of the target profit formula. Explanation 2. If Biblio Files Company wants to increase its profit by $30,000 in the coming year, what must their amount of sales be? Points: 0 / 1 Feedback Check My Work Examine the differences between the two companies, including the differences in elements of the target profit formula. Explanation 3. What would explain the difference between your answers for (1) and (2)? The answers are not different; each company has the same required sales amount for the coming year to achieve the desired target profit. The companies have goals that are not in the relevant range.Selection incorrect. Group correctness is false. Cover-to-Cover Companys contribution margin ratio is lower, meaning that its more efficient in its operations. Biblio Files Company has a higher contribution margin ratio, and so more of each sales dollar is available to cover fixed costs and provide income from operations.