Mastery Problem: Cost-Volume-Profit Analysis Cost Behavior Cover-to-Cover Company is a manufacturer of thelving for baoks. The company has compiled the folloning cost data, and wants your help in determining the cott behavior: After reviewing the cata, complete requirements (1) and (2) that follow. 1. Determine whether the costs in the table are variable, fixed, mixed, or none of these. 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, fiecall that, for N. Number of Units Produced, Total Costs = (Variable Cost. Per Unit xN ) + Fixed Cost. Camplete the following table with your answers. Round variable portion of cost (per unit) answers to two decimal places. Biblio Files Company is the chief competitor of Cover-to-Cover Company in the booksheif business, Biblio Files is analyaing its manufacturing coscs, and has coiraplied the following data for the first six months of the year. Aftee reviewing the data, answer questions (1) through (3) that follow. 1. From the data previously provided, heip Biblio Files Company estimate the foxed and variable portions of its total costs using the high-low method. Recell that Total Costs = (Variable Cost Per Unit Number of Units Produced) + Fixed Cost. Complete the following table. 2. With your Total Fixed Cost and Variable Costherememphnommanding how method, compute the total cost for the following values of N (Number of Units Produced). 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 monthe in which production is at full capacity. b. The high-low method only gives accurate data when fixed costs are zero. a. The high-low method is accurate only for months in which production is at full capacity. b. The high-lew 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 cotier than the highest and lowest. d. The high-low method gives accurate data anly for levels of production outside the relevant ranget. Contribution Margin Review the contribution margin inceme statements for Cover-to-Cever Company and thblio files Company on their respective Income statements. Complete the foliowing table from the data provided on the income statements. Each company sold 74,800 units during the yeat. \begin{tabular}{lrr} Manufacturing expense & & \\ Selling expense & $224,400 & \\ Administrative expense & 18,700 & \\ Contribution margin & 56,100 & (299,200) \\ \cline { 2 - 3 } Fixed costs: & & $74,800 \\ Manufacturing expense & & \\ Selling expense & $5,000 & \\ Administrative expense & 4,000 & \\ Operating income & 9,700 & (18,700) \\ \hline Income Statement - Biblio Files & & $56,100 \\ \hline \end{tabular} Biblio Files Company Contribution Margin Income statement For the Year Ended December 31, 20Y8 Sales Variable costs: Manufacturing expense Selling expense $149,600 Administrative expense Contribution margin 14,960 Fixed costs: Manufacturing expense Selling expense \begin{tabular}{rr} 59,840(224,400) \\ \hline & $149,600 \end{tabular} Biblio Files Company is making plans for its next fiscal year, and decides to sell two new types of beokshelves, Basic and beluxe. The company has compled the following estimates for the new product offerinas. 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 enterpilse product called "Combined, " the unit contribution margin for the Combined product would be $2.31. Fxed costs for the upcoming year are estimated at $328,020, Recall that the totals of all the calos miv rarcents must be 100%. Determine the amounts to complete the following toble. Target Profit Refer again to the income-statements for Cover-to-Cover Company and Bablio Filles Company on their respective Income Statementi 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 $40,000 in the coming year, what must their amount of sales be? 5 2. If Biblio Files Company wants to increase its profit by $40,000 in the coming year, what must their amount of saies be? 4 3. What waild exnlain the otifference hetween vour answers for (1) and (2l)? year are estimated at $328,020. Recall that the totals of alt rined," the unit contribution margin for the Combined product whold be think of the Basic and Deluxe prod cents must be 100%. Determine the amounts to complete the folowing table. Target Profit Refer again to the income statements for Cover-to-Cover Company and Biblio Fles Company on their respective Income statement, Note that both companies have 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 amouni sales. 1. If Cover-to-Cover Company wants to increase its profit by $40,000 in the coming year, what must their amount of sales be? 2. If Biblio Files Company wants to increase its profit by $40,000 in the coming yeac, what must their amount of sales be? 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 range. d. The answers are not different; each company has the same required salos amount for the coming year to achieve the desired target profit