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M 7 CNOW Critical Thinking ( Ch . 2 0 , 2 1 ) Question Content Area Mastery Problem: Cost - Volume - Profit Analysis

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M7 CNOW Critical Thinking (Ch.20,21)
Question Content Area
Mastery Problem: Cost-Volume-Profit Analysis
Question Content Area
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
10,000 shelves $100,000 $13,000 $140,000
20,000 shelves 200,00024,500140,000
40,000 shelves 400,00047,500140,000
50,000 shelves 500,00059,000140,000
1. Determine whether the costs in the table are variable, fixed, mixed, or none of these.
Lumber
Variable Cost
Utilities
Mixed Cost
Depreciation
Fixed Cost
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 042057f4305801e_4
$fill in the blank 042057f4305801e_5
Utilities fill in the blank 042057f4305801e_6
fill in the blank 042057f4305801e_7
Depreciation fill in the blank 042057f4305801e_8
fill in the blank 042057f4305801e_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 2756,250
March 1,00015,000
April 6,775136,250
May 1,75032,500
June 3,01548,000
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 0ae782025fcc05b_1
$fill in the blank 0ae782025fcc05b_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 0ae782025fcc05b_3
4,360 fill in the blank 0ae782025fcc05b_4
6,775 fill in the blank 0ae782025fcc05b_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.
c
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 77,800 units during the year.
Cover-to-Cover
Company Biblio Files
Company
Contribution margin ratio (percent) fill in the blank 318ca3fedfa7fa8_1
% fill in the blank 318ca3fedfa7fa8_2
%
Unit contribution margin $fill in the blank 318ca3fedfa7fa8_3
$fill in the blank 318ca3fedfa7fa8_4
Break-even sales (units) fill in the blank 318ca3fedfa7fa8_5
fill in the blank 318ca3fedfa7fa8_6
Break-even sales (dollars) $fill in the blank 318ca3fedfa7fa8_7
$fill in the blank 318ca3fedfa7fa8_8
Question Content Are
Income Statement - Cover-to-Cover
Cover-to-Cover Company
Contribution Margin Income Statement
For the Year Ended December 31,20Y8
Sales $389,000
Variable costs:
Manufacturing expense $233,400
Selling expense 19,450
Administrative expense 58,350(311,200)
Contribution margin $77,800
Fixed costs:
Manufacturing expense $5,000
Selling expense 4,000
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 31,20Y8
Sales $389,000
Variable costs:
Manufacturing expense $155,600
Selling expense 15,560
Administrative expense 62,240(233,400)
Contribution margin $155,600
Fixed costs:
Manufacturing expense $79,250
Selling expense 8,000
Administrative expense 10,000(97,250)
Operating income $58,350
Sales Mix
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