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 12,000 shelves $144,000    $14,800    $130,000    24,000 shelves 288,000    28,600    130,000    48,000 shelves 576,000    56,200    130,000    60,000 shelves 720,000    70,000    130,000    1. Determine whether the costs in the table are variable, fixed, mixed, or none of these. Lumber Variable Cost  Utilities Mixed Cost  Depreciation Fixed Cost  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. Round variable portion of cost (per unit) answers to two decimal places. Cost Fixed Portion of Cost Variable Portion of Cost (per Unit) Lumber $fill in the blank 1de21302101f041_4 $fill in the blank 1de21302101f041_5 Utilities fill in the blank 1de21302101f041_6 fill in the blank 1de21302101f041_7 Depreciation fill in the blank 1de21302101f041_8 fill in the blank 1de21302101f041_9

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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
12,000 shelves $144,000    $14,800    $130,000   
24,000 shelves 288,000    28,600    130,000   
48,000 shelves 576,000    56,200    130,000   
60,000 shelves 720,000    70,000    130,000   

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

Lumber Variable Cost 
Utilities Mixed Cost 
Depreciation Fixed Cost 

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. Round variable portion of cost (per unit) answers to two decimal places.


Cost
Fixed Portion
of Cost
Variable Portion
of Cost (per Unit)
Lumber $fill in the blank 1de21302101f041_4 $fill in the blank 1de21302101f041_5
Utilities fill in the blank 1de21302101f041_6 fill in the blank 1de21302101f041_7
Depreciation fill in the blank 1de21302101f041_8 fill in the blank 1de21302101f041_9
 
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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.

  Units Produced Total Cost
January 4,360 units $65,600
February 275   6,250
March 1,000   15,000
April 6,775   103,750
May 1,750   32,500
June 3,015   48,000

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 Number of Units Produced) + Fixed Cost. Complete the following table.

Total Fixed Cost Variable Cost per Unit
$fill in the blank 68301efd8ff1f86_1 $fill in the blank 68301efd8ff1f86_2

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 $fill in the blank 68301efd8ff1f86_3
4,360 fill in the blank 68301efd8ff1f86_4
6,775 fill in the blank 68301efd8ff1f86_5

3. 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

Review the contribution margin income statements for Cover-to-Cover Company and Biblio Files Company on their respective Income Statements. Complete the following table from the data provided on the income statements. Each company sold 83,800 units during the year.

  Cover-to-Cover
Company
Biblio Files
Company
Contribution margin ratio (percent) fill in the blank 55c150fdef87f91_1% fill in the blank 55c150fdef87f91_2%
Unit contribution margin $fill in the blank 55c150fdef87f91_3   $fill in the blank 55c150fdef87f91_4  
Break-even sales (units) fill in the blank 55c150fdef87f91_5   fill in the blank 55c150fdef87f91_6  
Break-even sales (dollars) $fill in the blank 55c150fdef87f91_7   $fill in the blank 55c150fdef87f91_8  
 
 
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