Cost Behavior High-Low Contribution Margin Income Statement-Cover-to-Cover 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 Units Produced Total Lumber Cost Total Utilities Cost Total Machine Depreciation Cost 4,000 shelves $48,000 $5,600 $130,000 8,000 shelves 96,000 10,200 130,000 16,000 shelves 192,000 19,400 130,000 20,000 shelves 240,000 24,000 130,000 1. Determine whether the costs in the table are variable. fixed mixed, or none of these Variable Cost Fixed Cost Mixed Cost None of these Lumber Utilities Depreciation 0 Cost Behavior 16,000 shelves 192,000 19,400 130,000 20,000 shelves 240,000 24,000 130,000 1. Determine whether the costs in the table are variable, fixed, mixed, or none of these. Lumber Variable Cost Fixed Cost Mixed Cost None of these 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 "0". Recall that, for No Number of Units Produced, Total Costs (Variable Cost Per Unit x N)+ Fixed Cost. Complete the following table with your answers Cost Fixed Portion of Cost Variable Portion of Cost (per Unit) Lumber S Utilities Depreciation X Cost Behavior High-Low Contribution margin Cost Behavior High-Low Biblio Files Company is the chief competitor of Cover-to-Cover Company in the bookshelf business. Bibilo 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 (1) through (3) that follow Number of Units Produced Total Cost January 4,300 $65,600 February 275 6.250 March 1,000 15,000 April 5.025 101,250 May June 1,750 32,500 3,015 48,000 1. From the data previously provided, help Blo 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) + Fixed Cost Complete the following table Total Fixed Cost Variable Cost per Unit 2 Win your Total Fixed Cost and Variahin Gost ner Lint from the high low method commute the total cost for the following valms of N/Number of Units Produced Previous Next> 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 4,360 5,025 3. Why does the total cost computed for 4,360 units not match the data for January in the table at the top of this panel? OO The high-low method is accurate only for months in which production is at full capacity. 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. The high-low method gives accurate data only for levels of production outside the relevant range The high-low method only gives accurate data when fixed costs are zero. Mastery Problem: Cost-Volume-Profit Analysis Cost Behavior High-Low Contribution Margin Income Statement-Cover-to-Cover Cost Behavior High-Low Contribution Margin Review the contribution margin income statements for Cover-to-Cover Company and Biblio Files Company on their respective Income Statements panels. Complete the following table from the data provided in the income statements. Each company sold 84,800 units during the year. Contribution margin ratio (percent) Unit contribution margin- Break-even sales (units) Break-even sales (dollars) Cover-to-Cover Company Biblio Files Company 1 Sales 2 Variable costs: 3 Manufacturing expense 4 Selling expense s Administrative expense Cover-to-Cover Company Contribution Margin Income Statement For the Year Ended December 31, 20Y7 $254,400.00 $424,000.00 21,200.00 63,600.00 339,200.00 $84,800.00 6 Contribution margin 7 Fixed costs: Manufacturing expense $5,000.00 Selling expense 4,000.00 10 Administrative expense 12,200.00 21,200.00 11 Income from operations $63,600.00 Cost Behavior High-Low Contribution Margin Income Statement-Cover-to-Cover ncome Statement - Biblio Files 1 Sales 2 Variable costs: Manufacturing expense Selling expense 5 Administrative expense Biblio Files Company Contribution Margin Income Statement For the Year Ended December 31, 20Y7 $424,000.00 $169,600.00 16,960.00 67,840,00 254,400.00 $169,600.00 6 Contribution margin 7 Fixed costs: $88,000.00 Manufacturing expense 8,000.00 Selling expense 10,000.00 106,000.00 10 Administrative expense $63,600.00 11 Income from operations Income Statement - Biblio Files Income Statement-Cover-to-Cover 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 Bookshelf Sales Price per Unit Variable Cost per Unit Basic Deluxe $5.00 9.00 $1.75 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 $346,962. Recall that the totals of all the sales.mix percents must be 100%. Determine the amounts to complete the following table. Type of Bookshelf Percent of Sales Mix Break-Even Sales in Units Break-Even Sales in Dollars Basic Deluxe " Mastery Probiani: Cost-volume-Pront Analysis Cost Behavior High-Low Contribution Margin Income Statement-Cover-to-Cover Income Statement - Biblio Files Income Statement-Cover-to-Cover Sales Mix Target Profit Refer again to the income statements for Cover-to-Cover Company and Biblio Files Company on their respective Income Statement panels. 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 $20,000 in the coming year, what must their amount of sales be? 2. If Biblio Files Company wants to increase its profit by $20,000 in the coming year, what must their amount of sales be? 3. What would explain the difference between your answers for (1) and (2)? The companies have goals that are not in the relevant range. Biblio Files Company has a higher contribution margin ratio, and so more of each sales dollar is available to cover fixed costs and provide income from operations The answers are not different; each company has the same required sales amount for the coming year to achieve the desired target profit Cover-to-Cover Company's contribution margin ratio is lower, meaning that it's more efficient in its operations