Mastery Problem: Cost-Volume-Profit Analysis 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. Total Total Total Machine Units Lumber Utilities Depreciation Produced Cost Cost Cost 7,000 shelves $84,000 $9,550 $120,000 14,000 shelves 168,000 17,600 120,000 28.000 shelves 336,000 33,700 120,000 35,000 shelves 420,000 41,750 120,000 1. Determine whether the costs in the table are variable, fred, mixed, or none of these Lumber Variable Cost Utilities Mixed Cost Fixed Cost Depreciation 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"O". Recall that, for Number of Units Produced, Total Costs (Variable Cost Per Unit XN) + 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) Lumber 07 12.00 Uulities 1,000 x 1.15 ha 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 "O". Recall that, for N- Number of Units Produced, Total Costs - (Variable Cost Per Unit XN) + 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) Lumber 07 12.00 Utilities 1,000 X 1.15 Depreciation 125,000 X 07 Check My W Review the definitions for fixed, variable, and mixed costs, and the relationships between units produced and total cost for each type of cost. Recall that the high- low method may be used to separate a cost into its fixed and variable components High-Low Biblio Files Company is the chief competitor of Cover-to-Cover Company in the bookshell business. BiblioFiles 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 300 6,250 March 1,000 15,000 April 7,800 156,250 May 1,750 32,500 AR High-Low Biblio Files Company is the chief competitor of Cover-to-Cover Company in the bookshell business. BiblioFiles 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 300 6,250 March 1,000 15,000 April 7,800 156,250 May 1,750 32,500 June 3,015 48,000 1. From the data previously provided, help Bibllo 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) + Foxed Cost. Complete the following table. Total Fixed Cost Variable Cost per Unit 2507 20 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 70,250 4,360 87,450 7,800 156,000 X 3. Why does the total cost computed for 4,350 units not match the data for January? a. The high-low method is accurate only for months in which production is a full capacity 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 a 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 Review the high-low method, and use the smallest and largest levels of production in your computation Contribution Margin Review the contribution margin income statements for Cover-to-Cover Company and BiblioFiles Company on their respective Income Statements Complete the following table from the data provided on the income statements. Each company sold 79,800 units during the year. Cover-to-Cover Biblio Files Company Company Contribution margin ratio (percent) 20 40 Unit contribution margin 1.00 2.50X Break-even sales (units) 19,950 39,900 x Break-even sales (dollars) 995,500 X 249,300 X Calculator Income Statement - Cover-to-Cover Cover-to-Cover Company Contribution Margin Income Statement For the Year Ended December 31, 2018 Sales $399,000 Variable costs Manufacturing expense $239,400 Selling expense 19,950 Administrative expense 59,850 (319,200) Contribution margin $79,800 Fixed costs Manufacturing expense Selling expense Administrative expense $5,000 4 poo 10,950 (19,950) Operating Income $59,850 Income Statement - Biblio Files Biblio Files Company Contribution Margin Income Statement For the Year Ended December 31, 2048 Sales $399,000 Variable costs: $159,600 Manufacturing expense Selling expense 15,960 Check My Work 3 more Check My Work uses remaining Email Instructor Save and Exit Submit Assignment for Grading MacBook Air Calculator Biblio Files Company Contribution Margin Income Statement For the Year Ended December 31, 2018 $399,000 Sales $159,600 Variable costs: Manufacturing expense Selling expense Administrative expense Contribution margin 15,960 63,840 (239,400) $159,600 Fixed costs: Manufacturing expense Selling expense Administrative expense Operating income $81,750 8,000 10,000 (99,750) $59,850 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 Sales Price Variable Cost Bookshelf per Unit 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 $346,500, Recall that the totals of all the sales mix percents must be 100%. Determine the amounts to complete the following table Check My Work 3 more Check My Work remaining Emal Instructor Save and Submit Assignment for Grading 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 Sales Price Variable Cost Bookshelf per Unit 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 $346,500. Recall that the totals of all the sales mix percents must be 100%. Determine the amounts to complete the following table. Type of Percent of Sales Break-even Break-even Sales Bookshelf Sales in Units in Dollars Basic 60 Mix Deluxe 40% Accounting numeric field Check My Work Review the definition of break even point. Recall that the combined unit contribution margin is given by [(Basic unit contribution margin) x (Basic percent of sales mix)] + (Deluxe unit contribution margin) x (Deluxe percent of sales mix)]. Since these percents must add up to 100%, we have the following: (Basic percent of sales mix) + (Deluxe percent of sales mix) - 100%, so that (Deluxe percent of sales mix) - 100% (Basic percent of sales mix) Check My Work 3mor Check My Work uses remaining Email instructor Save and Exit Submit Assignment for Grading