Cover-to-Cover Company is a manufacturer of shelving for books. The company has
ID: 2431287 • Letter: C
Question
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
Total
Total
Total Machine
Produced
Lumber Cost
Utilities Cost
Depreciation Cost
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 N= Number of Units Produced, Total Costs = (Variable Cost Per Unit x N) + Fixed Cost. Complete the following table with your answers.
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 (1) through (3) that follow.
Month
Number of Units Produced
Total Cost
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 Units Produced) +
Fixed Cost. Complete the following table.
Variable Cost per Unit
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).
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.
Cover-to-Cover Company
Contribution Margin Income Statement
For the Year Ended December 31
1
Sales
$424,000.00
2
Variable costs:
3
Manufacturing
$233,200.00
4
Selling
21,200.00
5
Administrative
63,600.00
318,000.00
6
Contribution margin
106,000.00
7
Fixed Costs:
8
Manufacturing
$5,000.00
9
Selling
4,000.00
10
Administrative
33,400.00
42,400.00
11
Income from operations
$63,600.00
Biblio Files Company
Contribution Margin Income Statement
For the Year Ended December 31
1
Sales
$424,000.00
2
Variable costs:
3
Manufacturing
$169,600.00
4
Selling
16,960.00
5
Administrative
67,840.00
254,400.00
6
Contribution margin
169,600.00
7
Fixed Costs:
8
Manufacturing
$88,000.00
9
Selling
8,000.00
10
Administrative
10,000.00
106,000.00
11
Income from operations
$63,600.00
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
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.
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. If required, round answers to the nearest dollar.
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 $30,000 in the coming year, what must their amount of sales be? $
Units
Total
Total
Total Machine
Produced
Lumber Cost
Utilities Cost
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 $130,000Explanation / Answer
1. Determine whether the costs in the table are variable, fixed, mixed, or none of these. Variable Fixed Cost Mixed cost None of this Lumber _/ X X X Utilities X X _/ X Depreciation X _/ X X 2. For each cost, determine the fixed portion of the cost and per unit variable cost Cost Fixed Portion of cost Variable portion of cost (Per Unit) Lumber Nil $12.00 Utilities $1,000 $1.15 Depreciation 130000 Nil 1. From the data provided above, 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 Units Produced) + Fixed Cost. Complete the table below. Units Total cost Maximum Units produced 5475 111250 Minimum Units produced 225 6250 Difference 5250 105000 Variable cost per unit 20 Computation of Fixed Costs Cost of 5,475 units 111250 Less Variable cost @ $20 per unit 109500 Fixed costs 1750 2. With your Total Fixed Cost and Variable Cost per Unit from the High-Low Method, calculate the total cost for the following values of N (Number of Units Produced). Units Produced Fixed cost Variable cost Total Cost 3500 1750 70000 71750 4360 1750 87200 88950 5475 1750 109500 111250