Cost Behavior Shaded cells have feedback. Cover-to-Cover Company is a manufactur
ID: 2556949 • Letter: C
Question
Cost Behavior Shaded cells have feedback. 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) below. Units Produced 4,000 shelves 8,000 shelves 16,000 shelves 20,000 shelves Total Total Total Machine Lumber Cost Utilities Cost Depreciation Cost $48,000 $96,000 S192,000 $240,000 $5,600 $10,200 $19,400 $24,000 $130,000 $130,000 $130,000 $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 Points 0 3 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 x N) + Fixed Cost. Complete the table below with your answers Cost Fixed Portion of Cost Variable Portion of Cost (per Unit) Lumber Utilities $ Depreciation$ Points 0/6 Feedback Check My Work Review the definitions for fixed, variable, and mixed costs, and the relationships between units produced and total cost for each type of cost. Recall that the high-low method may be used to separate a cost into its fixed and variable components.Explanation / Answer
Answer
Answer 1 Working – Using High Low Method
Lumber Cost
Utilities Cost
Depreciation Cost
Cost at High Level
240000
24000
130000
Cost at Low Level
48000
5600
130000
Difference (A)
$192000
$18400
$0
Units at High Level
20000
20000
20000
Unit at Low Level
4000
4000
4000
Difference (B)
$16000
$16000
$16000
Variable Cost per Unit (A/B)
$12
$1.15
$0
Total Variable cost at high level
$240000
$23000
$0
Total Fixed Cost at High Level
$0
$1000
$130000
Answer 1
Variable Cost
Fixed Cost
Mixed Cost
None of these
Lumber
YES
Utilities
YES
Depreciation
YES
Answer 2
Fixed portion of Cost
Variable portion of cost (per unit)
Lumber
$0
$12
Utilities
$1000
$1.15
Depreciation
$130000
$0
Working
Cost
Units
High Level
56250
5250
Low Level
6250
250
Difference
$50000
5000
Difference in cost
$50000
Difference in Units
5000
Variable cost per unit [50000/5000]
$10
High Level
Low Level
Units
5250
250
Variable cost per unit
$10
$10
Total Variable cost
$52500
$2500
Total cost given
$56250
$6250
Hence, Fixed cost =
$3750
$3750
Answer 1
Total Fixed Cost
Variable cost per unit
$3750
$10
Answer 2
Number of Units
Total Variable cost at $10 per unit
Total Fixed Cost
Total Cost – ANSWER COLUMN
3500
$ 35,000.00
$ 3,750.00
$ 38,750.00
4360
$ 43,600.00
$ 3,750.00
$ 47,350.00
5250
$ 52,500.00
$ 3,750.00
$ 56,250.00
Answer 3
Option 1 is the correct statement regarding High Low Method.
Working
Cover to Cover Company
Biblio Files Company
Total ($)
Per Unit [Total/84800 units] ($)
Total ($)
Per Unit [Total/84800 units] ($)
Sales
424000
5
424000
5
Variable Costs:
Manufacturing
212000
2.5
169600
2
Selling
21200
0.25
16960
0.2
Administrative
63600
0.75
33920
0.4
Contribution margin
$127,200
$1.5
$203,520
$2.4
Fixed Costs:
Manufacturing
5000
121920
Selling
4000
8000
Administrative
54600
10000
Income from Operation
$63600
63600
Answer
Cover to Cover Company
Biblio Files Company
A
Contribution margin [total]
$127200
$203520
B
Sales Revenue [total]
$424000
$424000
C=A/B
Contribution margin ratio
30%
48%
D=calculated above
Unit Contribution margin
$1.5
$2.4
E
Fixed Cost
$63600
$139920
F=E/D
Break Even Sales [units]
42400
58300
G=E/C
Break Even Sales (dollars]
$212000
$291500
Lumber Cost
Utilities Cost
Depreciation Cost
Cost at High Level
240000
24000
130000
Cost at Low Level
48000
5600
130000
Difference (A)
$192000
$18400
$0
Units at High Level
20000
20000
20000
Unit at Low Level
4000
4000
4000
Difference (B)
$16000
$16000
$16000
Variable Cost per Unit (A/B)
$12
$1.15
$0
Total Variable cost at high level
$240000
$23000
$0
Total Fixed Cost at High Level
$0
$1000
$130000