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 bubavio After reviewing the data complete requirements (1) and (2) that follow. Total Total Total Machine Units Lumber Utilities Depreciation Produced Cost Cost Cost 10,000 shelves $110,000 $12,500 $135,000 20,000 shelves 220,000 24,000 135,000 40.000 shelves 440,000 47.000 135.000 50,000 shelves 550,000 58,500 135,000 1. Determine whether the costs in the table are variable, fixed, mixed, or none of these Lumber Utilities 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 N = Number of Units Produced, Total Costs (variable Cost Per Unit XN) + Mixed 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 Utilities Depreciation 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 through (3) that follow Units Produced Total Cost January 4,360 units $65,600 February 300 6,250 March 1,000 15,000 April 7,000 110.750 May 1.750 32.500 3,015 40,000 1. From the data previously provided help BiblioPiles 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 Cont. Complete the following table Total Fixed Cast Variable Cost per Unit 2. with your Total Fixed Coat 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 4,360 7.000 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 iced costs are zero c. The high-low method gives formula for the estimated total cost and may not match levels of production other than the Highest and lowest 2. with your Total Fixed cost and Varsable 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 4,360 7,800 3. Why does the total cost computed for 4,360 units not match the data for January? The high-low method is accurate only for months in which production is a full capacity D. The high-low method only gives accurata 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 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 77,000 units during the year Cover-to-Cover Biblio Files Company Company Contribution margin fatio (percent) Unit contribution margin Break-even sales (units) Break-even sales (dollars) Income Statement - Cover-to-Cover Cover-to-Cover Company Contribution Margin Income Statement For the Year Ended December 31, 2018 Sales $389,000 Variable costs: Manufacturing expense 5233,400 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, 2048 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 $155,600 15,560 62.240 Printem Variable costs: Manufacturing expense Selling expense Administrative expense Contribution margin Fixed costs Manufacturing expense Selling expense Administrative expense Operating income (233,400) $155,600 $79,250 8,000 10,000 (97,250) $58,350 Sales Mix Biblio Files Company is making plans for its next fiscal year, and decides to sell two new types of bookshelves, Basle 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 55.00 $1.75 Deluxe 9.00 3.10 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.Jl. Fixed costs for the upcoming year are estimated at $532, 640, Recall that the totals of all the sales mix percents must be 2.0016. Determine the amounts to complete the following table Type of Bookshelf Percent of Sales Mix Break-Even Sales Break-Even Sales in Units in Dollars Basic 9 Deluxe Deluxe 9.00 3.10 The company le 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 Tesle and Deluxe products as components of one overall enterprise product called "Combined," the unit contribution margin for the combined product would be $2.51 Eixed costs for the upcoming year are estimated at $382.640. Recall that the total of all the sales mix percento must be 100. Determine the amounts to complete the following table Type of Percent of Break-Even Sales Break-even Sales Bookshell Sales Mix in Units in Dollars Basic Deluxe Target Profit Reter again to the income statements for Cover-to-Cover Company and Bibilio Files Company on their respective Income Statement. Note that both companies have the same sales and net income. Answer questions (1) - (3) that follow, sturing that it data for the coming vast is the same as the current yeat except for the amount of sales 1. If Cover-to-Cover Company wants to increase its profit by $30,000 in the coming year, what must their amount of sales be? 2. IF Biblio Files Company wants to increase its profit by $10,000 in the coming year what must their amount of sales be? 3. What would explain the difference between your answers for (1) and (2) Biollo Files company has a higher contribution margin ratio, and so more of each sales dollar is available to cover foxed 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 sales amount for the coming year to achieve the desired target profit