Mastery Problemi cost-Volume-Profit Analysis Cont 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 behavier. After reviewing the data, complete requirements (1) and (2) that follow Total Total Total Machine Units Lumber Utilities Depreciation Produced Cost Cost 12,000 shelves $132.000 $15,000 $125,000 24,000 shelves 264,000 29,600 125,000 48,000 shelves $28,000 57,200 125,000 60,000 shelves 660,000 71,000 125.000 1. Determine whether the costs in the table are variable, fixed, mixed, or none of these Lumber Variable Cost 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, entero Recall that, for Number of Units Produced, Total Costs (Variable Cost Per Unit XN) + Pred 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 X Us 1,000 X 1.15 Depreciation 125.000 0.00 High-Low Biblio Ries Company is the chief competitor of Cover-to-Cover Company in the bookshelf business. Biblio Files is analyring 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 4,800 96,250 May 1,750 32,500 June 3,015 48,000 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) * Pied Cost. Complete the following table Total Fixed Cost Variable Cost per Unit 1,750 X 20.00 2. Wth 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 3,500 187,025 X 4,360 198,334 x 4,500 206,750 X 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 rero. Contribution Margin Review the contribution maryin income statements for Cover-ta-Cover Company and Biblo Filles Company on their respective Income Statements Complete the following table trom the data provided on the income statements. Each company sold 81,000 units during the year Cover-to-Cover Bille Files Company Company Contribution martin ratio (percent) 20 48 X Unit contribution margin 11 2.4 x break even sales (units) 21,200 x 58,300 x Break-even sales (dollars) 106,000 x 699,600 X Review the definitions of contribution margin ratio and unit contribution margin. Also review the formulas for break-even in terms of units old and sales dollars. Income Statement - Cover-to-Cover Cover-to-Cover Company Contribution Margin Income Statement For the Year Ended December 31, 2018 Sales 5409,000 Variable costs Manufacturing expense $245,400 Selling expense 20,450 Administrative expense 61,350 (327,200) Contribution margin $81,800 Check My Work 4 mom Check My Work uses remaining Selling expense 20,450 Administrative expense 61,350 (327,200) Contribution margin 581,800 Fixed costs: Manufacturing expense $5,000 Selling expense 4,000 Administrative expense 11,450 (20,450) Operating income $61,350 Income Statement - Biblio Files Biblio Files Company Contribution Margin Income Statement For the Year Ended December 31, 2018 Sales $409,000 Variable costs: Manufacturing expense $163,600 Selling expense 16,360 Administrative expense 65,440 (245,400) Contribution margin $163,600 Fxed costs: Manufacturing expense $84.250 Selling expense 8,000 Administrative expense 10,000 (102,250) Operating income $61,350 Sales Mix Operating Income $61,350 Sales Mb 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 product 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 upcomin year are estimated at $323,400. 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 Break-Even Sales Break-Even Sales Bookshelf Sales Mix in Units in Dollars Basic Deluxe % Chu Mr Wom Review the definition of break-even point Recall that the combined unit contribution margin is given by [(Basic unit contribution margin) * (Basic percent of sales mix)] + [(Deluxe unit contribution margin) * (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) Target Profit Refer again to the income statements for Cover-to-Cover Company and Bible Files Company on their respective Income Statement. 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. Il Cover-to-Cover Company wants to increase its profit by $20,000 in the coming year, what must their amount of sales be? 306,000 x 2. 146/blo Files Company wants to increase its profit by $20,000 in the coming year, what must their amount of sales be? 374,833 x 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 feed costs and provide operating income. b. Cover-to-Cover Company's contribution margin ratio is tower, 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 w Examine the differences between the two companies, including the differences in elements of the target profit formula MW Partially correct Oweck My Work 4 more Check My Works remaining