Mastery Problem: Cost-Volume-Profit Analysis Cost Behavior Cover-to-Cover Company is a manufacturer of shelving for books: The company has compiled the folowng cost dots, and wants your delp in determining the cost benevar. Aner reviewing the data, complete requirements (1) and (2) that follow Total Total Total Machine Units Lumber Utsties Depreciation Produced Cost Cost Cost 12,000 shelves $132.000 315,600 5130.000 24,000 shelves 264,000 20,600 130.000 40.000 shelves 520.000 57,200 130.000 60,000 shelves 660,000 71,000 230,000 1. Decemine whether the costs in the hole are variat, fed minor none of these Lumber Variable cost Ubilities Mixed COS Depreciation Fixed cost 2. For each cont determine the lived portion of the cort, teperunt variable cost, there is no anount or an amount in gero entero Recall that for N = Number of intes Produced, Teen Cos - (Variatie Cost Per Unit 0 Fixed Cost Complete the following table with your answers, Round variable portion of cost (per unit) answers to two decimal places Fixed Portion Variable Portion Cost of Cost of Cost (per Unit Lanter 10 ilities Depreciation High-Low Biblio Pies Company in the chief competitor of Cover-to-Cover Company in the book their business, Files is analyzing its matutacturing costs, and has compiled the following data fit the st six months of the year. After reviewing the dots, questions (1) through (3) that follow Units Produced Total Cost January 4.360 505,600 February 225 March 1.000 15,000 April 116.250 Hav 1.750 32,500 June 48.000 1. From the previously wide, help to File Company estimate the fied and variable portions of its total cost the high w method. Recall at Total Couts (Variosteunemer oft Produced) und Control the following table Total Fixed Cost Variable Caut per Unit 67 2. wen your tot Fixac Cotond Variacle Chat per unit from the high on method, compute the natal cost for the following values of (Number of Unes Produced) Number of Units Produced Total Cost 3.500 4,350 lll 6,775 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, Contribution Margin Ieview the contribution maron increments for Cover-to-Cover Company and the Company of their respective Income Statements Complete the following from the data provided on the income tements Bath company sold 75.000 during the year Coverto-Cover Bible Piles Company Company con (perc) Usitno Breakceses (detare) Income Statement - Cover-to-Cover - Cover-to-Cover Company Contribution Margin Income Statement For the Year Ended December 31, 2018 Sales $379,000 Variable costs: $227,400 Manufacturing expense Selling expense Administrative expense 18,950 56,850 (303,200) $75,800 Contribution margin Fixed costs: $5,000 Manufacturing expense Selling expense Administrative expense 4,000 9,950 (18,950) Operating income $56,850 Income Statement - Biblio Files - Biblio Files Company Contribution Margin Income Statement For the Year Ended December 31, 20Y8 Sales $379,000 Variable costs: Manufacturing expense $151,600 15,160 Selling expense 60,640 (227,400) $151,600 Administrative expense Contribution margin Fixed costs: Manufacturing expense Selling expense Administrative expense $76,750 8,000 10,000 (94,750) Operating income $56,850 Sales Mix Biblo Files Company is making plano for its not Pascal, and decides to sell two new types of hookshelves, Basit and Dale. The company has compiled the following estimates for the new product offering Type or Sales Price Variable Cost Bookshell per Unit per Unit Basic $5.00 $1.5 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 we think of the Basic and Deuxe products in components of one overall enterprise product called "Combined the ant contribution margin for the Comtenes product would be $2.31. Pored costs for the uscoming yow arestimated 1.123.400.Real at the total of all the percent mult de 100%. Determine the most complete the following table Type of Percent of Break-even Sales Break-Even Sales Bookshelf Sales Mix in Units In Dollars Basic DU Deluxe Target Profit Refer again to the income statements for Cover-to-Cover Company and Files Company on the respective Income Statement. Note that both companies have the same sales and net income, Answer Gestion (1)-(3) that follow, assuming that a data for the coming year is the same as the current year, except for the amount of sales. 1.1 Cover-to-Cover Company wants to increase its profit by $40,000 in the coming year what must their amount of sales be? 2.11 bile Files Company wants to increase prolit by $40,000 in the coming year, we must their amount of sales be? 3. What would explain the difference between your answers for (1) and (2) 2 Bio Ries Company has a higher contribution margin rate, and so more of each sales dollar is available to cover and outs and provide operating income Cover Cover Comans contribution margin ratio is lower, meaning that is more efficient in sperations. The companies have goals that are not in the relevantage d. The answers are not different each company has the same required amount for the coming year to achieve the desired target profit Mastery Problem: Cost-Volume-Profit Analysis Cost Behavior Cover-to-Cover Company is a manufacturer of shelving for books: The company has compiled the folowng cost dots, and wants your delp in determining the cost benevar. Aner reviewing the data, complete requirements (1) and (2) that follow Total Total Total Machine Units Lumber Utsties Depreciation Produced Cost Cost Cost 12,000 shelves $132.000 315,600 5130.000 24,000 shelves 264,000 20,600 130.000 40.000 shelves 520.000 57,200 130.000 60,000 shelves 660,000 71,000 230,000 1. Decemine whether the costs in the hole are variat, fed minor none of these Lumber Variable cost Ubilities Mixed COS Depreciation Fixed cost 2. For each cont determine the lived portion of the cort, teperunt variable cost, there is no anount or an amount in gero entero Recall that for N = Number of intes Produced, Teen Cos - (Variatie Cost Per Unit 0 Fixed Cost Complete the following table with your answers, Round variable portion of cost (per unit) answers to two decimal places Fixed Portion Variable Portion Cost of Cost of Cost (per Unit Lanter 10 ilities Depreciation High-Low Biblio Pies Company in the chief competitor of Cover-to-Cover Company in the book their business, Files is analyzing its matutacturing costs, and has compiled the following data fit the st six months of the year. After reviewing the dots, questions (1) through (3) that follow Units Produced Total Cost January 4.360 505,600 February 225 March 1.000 15,000 April 116.250 Hav 1.750 32,500 June 48.000 1. From the previously wide, help to File Company estimate the fied and variable portions of its total cost the high w method. Recall at Total Couts (Variosteunemer oft Produced) und Control the following table Total Fixed Cost Variable Caut per Unit 67 2. wen your tot Fixac Cotond Variacle Chat per unit from the high on method, compute the natal cost for the following values of (Number of Unes Produced) Number of Units Produced Total Cost 3.500 4,350 lll 6,775 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, Contribution Margin Ieview the contribution maron increments for Cover-to-Cover Company and the Company of their respective Income Statements Complete the following from the data provided on the income tements Bath company sold 75.000 during the year Coverto-Cover Bible Piles Company Company con (perc) Usitno Breakceses (detare) Income Statement - Cover-to-Cover - Cover-to-Cover Company Contribution Margin Income Statement For the Year Ended December 31, 2018 Sales $379,000 Variable costs: $227,400 Manufacturing expense Selling expense Administrative expense 18,950 56,850 (303,200) $75,800 Contribution margin Fixed costs: $5,000 Manufacturing expense Selling expense Administrative expense 4,000 9,950 (18,950) Operating income $56,850 Income Statement - Biblio Files - Biblio Files Company Contribution Margin Income Statement For the Year Ended December 31, 20Y8 Sales $379,000 Variable costs: Manufacturing expense $151,600 15,160 Selling expense 60,640 (227,400) $151,600 Administrative expense Contribution margin Fixed costs: Manufacturing expense Selling expense Administrative expense $76,750 8,000 10,000 (94,750) Operating income $56,850 Sales Mix Biblo Files Company is making plano for its not Pascal, and decides to sell two new types of hookshelves, Basit and Dale. The company has compiled the following estimates for the new product offering Type or Sales Price Variable Cost Bookshell per Unit per Unit Basic $5.00 $1.5 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 we think of the Basic and Deuxe products in components of one overall enterprise product called "Combined the ant contribution margin for the Comtenes product would be $2.31. Pored costs for the uscoming yow arestimated 1.123.400.Real at the total of all the percent mult de 100%. Determine the most complete the following table Type of Percent of Break-even Sales Break-Even Sales Bookshelf Sales Mix in Units In Dollars Basic DU Deluxe Target Profit Refer again to the income statements for Cover-to-Cover Company and Files Company on the respective Income Statement. Note that both companies have the same sales and net income, Answer Gestion (1)-(3) that follow, assuming that a data for the coming year is the same as the current year, except for the amount of sales. 1.1 Cover-to-Cover Company wants to increase its profit by $40,000 in the coming year what must their amount of sales be? 2.11 bile Files Company wants to increase prolit by $40,000 in the coming year, we must their amount of sales be? 3. What would explain the difference between your answers for (1) and (2) 2 Bio Ries Company has a higher contribution margin rate, and so more of each sales dollar is available to cover and outs and provide operating income Cover Cover Comans contribution margin ratio is lower, meaning that is more efficient in sperations. The companies have goals that are not in the relevantage d. The answers are not different each company has the same required amount for the coming year to achieve the desired target profit