High$-$Low

year. After reviewing the data, answer questions $(1)$ through $(3)$ that follow.

Produced$)+$ Fixed Cost. Complete the following table.

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

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 at 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.

Contribution Margin

statements. Each company sold $75,800$ units during the year.

Income Statement $-$ Cover$-$to$-$Cover

Cover$-$to$-$Cover Company

Contribution Margin Income Statement

For the Year Ended December $31,20Y8$

Variable costs: Fixed costs:

$\backslash$table$[[$Manufacturing expense,$$5,000,],[$Selling expense,$4,000,],[$Administrative expense,$9,950,(18,950)],[$Operating income,,$$56,850]]$

Income Statement $-$ Biblio Files

Biblio Files Company

Contribution Margin Income Statement

For the Year Ended December $31,20$ Y$8$

$\backslash$table$[[$Sales$,,$$$379,000],[$Variable costs:,,$],[$Manufacturing expense,$$151,600,],[$Selling expense,$15,160,],[$Administrative expense,$60,640,(227,400)],[$Contribution margin,,$$151,600],[$Fixed costs:,$$76,750,],[$Manufacturing expense,$8,000,],[$Selling expense,$10,000,(94,750)],[$Administrative expense,,$$56,850],[$Operating income,,$]]$

Sales Mix

Type of Sales Price Variable Costmust be $100\%.$ Determine the amounts to complete the following table.

Target Profit

$(1)-(3)$ that follow, assuming that all data for the coming year is the same as the current year, except for the amount of sales.

If Cover$-$to$-$Cover Company wants to increase its profit by $$40,000$ in the coming year, what must their amount of sales be$?$

$$

If Biblio Files Company wants to increase its profit by $$40,000$ in the coming year, what must their amount of sales be$?$

$

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 sales amount for the coming year to achieve the desired target profit.Mastery Problem: Cost$-$Volume$-$Profit Analysis

Cost Behavior

requirements $(1)$ and $(2)$ that follow.

Determine whether the costs in the table are variable, fixed, mixed, or none of these.

Lumber

Utilities

Depreciation

Cost Per Unit $N)+$ Fixed Cost. Complete the following table with your answers. Round variable portion of cost $($per unit$)$ answers to two decimal places.