I\'ll rate do not skip any parts please if you can\'t do don\'t do at all pass i
ID: 2402482 • Letter: I
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I'll rate do not skip any parts please if you can't do don't do at all pass it to someone else don't waste my question thanks ( I need all answers Cost behavior, High low, contribution margin, Sales mix, target profit Etc)
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.
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
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 N= Number of Units Produced, Total Costs = (Variable Cost Per Unit x N) + Fixed Cost. Complete the following table with your answers.
High-Low
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.
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.
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).
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?
The High-Low method gives accurate data only for levels of production outside the relevant range.
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 is accurate only for months in which production is at full capacity.
The High-Low method only gives accurate data when fixed costs are zero.
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.
Income Statement - Cover-to-Cover
Cover-to-Cover Company
Contribution Margin Income Statement
For the Year Ended December 31
1
Sales
$424,000.00
2
Variable costs:
3
Manufacturing
$212,000.00
4
Selling
21,200.00
5
Administrative
63,600.00
296,800.00
6
Contribution margin
127,200.00
7
Fixed Costs:
8
Manufacturing
$5,000.00
9
Selling
4,000.00
10
Administrative
54,600.00
63,600.00
11
Income from operations
$63,600.00
Income Statement - Biblio Files
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
33,920.00
220,480.00
6
Contribution margin
203,520.00
7
Fixed Costs:
8
Manufacturing
$121,920.00
9
Selling
8,000.00
10
Administrative
10,000.00
139,920.00
11
Income from operations
$63,600.00
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.
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.
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. If required, round answers to the nearest dollar.
1. If Cover-to-Cover Company wants to increase its profit by $40,000 in the coming year, what must their amount of sales be?
2. If Biblio Files Company wants to increase its profit by $40,000 in the coming year, what must their amount of sales be?
3. What would explain the difference between your answers for (1) and (2)?
Cover-to-Cover Company’s contribution margin ratio is lower, meaning that it’s more efficient in its operations.
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 companies have goals that are not in the relevant range.
The answers are not different; each company has the same required sales amount for the coming year to achieve the desired target profit.
Units Total Total Total Machine Produced Lumber Cost Utilities Cost Depreciation Cost 13,000 shelves $156,000 $15,950 $145,000 26,000 shelves $312,000 $30,900 $145,000 52,000 shelves $624,000 $60,800 $145,000 65,000 shelves $780,000 $75,750 $145,000Explanation / Answer
Cost Behaviour
1
2
Calculation for Utilities
Semi-variable cost= Difference in Utilities cost/Difference in Units produced
Semi-variable cost=$60,800-$30,900/52,000-26,000
Semi-variable cost=$29,900/26,000=$1.15 per unit
Fixed Portion=$30,900-(26,000*$1.15)=$1,000
High Low
1
Calculation of Variable cost per unit
Variable cost per unit=Total cost at highest levelof activity-total cost at lowest level of activity/number of units at highest level of activity-number of units at lowest level of activity
=$56,250-$6,250/5,250-250=$50,000/5000=$10 per unit
Total Fixed Cost=Total Cost-Total Variable cost=$56,250-(5250*$10)=$3750
2
3
The High-Low Method gives formula for the estimated total cost and may not match levels of production other than the highest and the lowest.
Contribution Margin
1
(Contribution/Sales)*100
=($127,200/$424,000)*100
=30%
(Contribution/Sales)*100
=($203,520/$424,000)*100
=48%
Fixed Cost/Profit Volume Ratio
=$63,600/30%=$212,000
Sales Mix
Working Note:
Let the required type of bookshelf to be produced for each type i.e Basic and Deluxe be X units and Y units respectively in order to be break even.
The combined contribution per unit is $2.31 per unit. The Fixed cost is $346962.
Therefore, required combined units for break even is $346962/$2.31= 150200 units.
Now, the contribution per unit of Basic and Deluxe bookshelf are as follows:
Basic= $(5-1.75)= $ 3.25 per unit.
Deluxe= $ (9-8.1)= $0.90 per unit.
We can frame the following equation: X+Y= 150200………………….. (1).
3.25X+0.90Y=346962………….. (2).
By solving
From equation 1
X=150200-Y
By putting the value of X in equation 2 we get
3.25*(150200-Y)+ 0.90Y= 346962
488150-3.25Y+0.90Y=346962
141188=2.35Y
Y= 60080 units
Now, X= (150200-60080)= 90120 units
Break Even Sales (Units)
Basic=90120 units and
Delux=60080 units
Break Even Sales (Dollars)
Basic=Break Even Sales(Units)*Sales Price per unit=90120*$5=$450600
Delux=60080*$9=$540720
Percentage of Sales Mix
Basic=Baisc units/Total units*100=90120/150200*100=60%
Delux=Delux units/Total units*100=60080/150200*100=40%
Target Profit
1. Cover-to-to Company
Sales=Required Contribution/Profit Volume Ratio
Required contribution=Fixed Cost+Profit=$63,600+$103,600=$167,200
Sales=$167,200/30%=557,333.33
2. Biblio Files Company
Sales=Required Contribution/Profit Volume Ratio
Required contribution=Fixed Cost+Profit=$139,920+$103,600=$243,520
Sales=$243,520/48%=507,333.33
3. Biblio Files Company has a higher contribution margin ratio and so more of each sales $ is available to cover Fixed Cost and provide income from operations.
Variable Cost Fixed Cost Mixed Cost None of these Lumber Yes (Since the variable cost per unit of every units produced are same i.e. $12 per unit) Utilities Yes Depreciation Yes (Since cost of every Production is same)Related Questions
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