High$-$LowCover$-$to$-$Cover Company

Contribution Margin Income Statement

For the Year Ended December $31,20$ Y$8$

Income Statement $-$ Biblio Files

Biblio Files Company

Contribution Margin Income Statement

For the Year Ended December $31,20Y8$

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.

percents must be $100\%.$ Determine the amounts to complete the following table.

Target Profit

If Cover$-$to$-$Cover Company wants to increase its profit by $$20,000$ in the coming year, what must their amount of sales be$?$

If Biblio Files Company wants to increase its profit by $$20,000$ in the coming year, what must their amount of sales be$?$

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.

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$).$

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