Income Statement - Cover-to-Cover Cover-to-Cover Company Contribution Margin Income Statement For the Year Ended December 31, 2048 Sales $389,000 Variable costs: Manufacturing expense $233,400 19,450 Selling expense Administrative expense Contribution margin 58,350 (311,200 $77,800 Fixed costs: > Manufacturing expense $5,000 4,000 Selling expense Administrative expense 10,450 (19,450) Operating income $58,350 Income Statement - Biblio Files Biblio Files Company Contribution Margin Income Statement For the Year Ended December 31, 2018 Sales $389,000 $155,600 Variable costs: Manufacturing expense Selling expense Administrative expense Contribution margin 15,560 62,240 (233,400) $155,600 Fixed costs: Manufacturing expense $79,250 Selling expense 8,000 Administrative expense 10,000 (97,250) Operating income $58,350 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 Bookshell 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 $325,710. Recall that the totals of all the sales mix percents must be 100%. Determine the amounts to complete the following table. Percent of Type of Bookshelf Break Even Sales in Units Sales Mix Break Even Sales in Dollars Basic 96 Deluxe 96 fe 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 S30,000 in the coming year, what must their amount of sales be? 2. If Biblio Files Company wants to increase its profit by $30,000 in the coming year, what must their amount of sales be? 5 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 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 ranger d. The answers are not different; each company has the same required sales amount for the coming year to achieve the desired target pront Feedback