Mastery Problem: Cost-Volume-Profit Analysis Answer this question please Question Content Area Cost Behavior 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 7,000 shelves $84,000 $9,550 $140,000 14,000 shelves 168,000 17,600 140,000 28,000 shelves 336,000 33,700 140,000 35,000 shelves 420,000 41,750 140,000 1. Determine whether the costs in the table are variable, fixed, mixed, or none of these. Lumber Utilities Depreciation 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 38e693023fd6ff1_4 $fill in the blank 38e693023fd6ff1_5 Utilities fill in the blank 38e693023fd6ff1_6 fill in the blank 38e693023fd6ff1_7 Depreciation fill in the blank 38e693023fd6ff1_8 fill in the blank 38e693023fd
Answer this question please
Question Content Area
Cost Behavior
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 Cost |
| 7,000 shelves | $84,000 | $9,550 | $140,000 |
| 14,000 shelves | 168,000 | 17,600 | 140,000 |
| 28,000 shelves | 336,000 | 33,700 | 140,000 |
| 35,000 shelves | 420,000 | 41,750 | 140,000 |
1. Determine whether the costs in the table are variable, fixed, mixed, or none of these.
| Lumber |
|
| Utilities |
|
| Depreciation |
|
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 38e693023fd6ff1_4 | $fill in the blank 38e693023fd6ff1_5 |
| Utilities | fill in the blank 38e693023fd6ff1_6 | fill in the blank 38e693023fd6ff1_7 |
| Depreciation | fill in the blank 38e693023fd6ff1_8 | fill in the blank 38e693023fd6ff1_9 |
Feedback Area
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.
Question Content Area
High-Low
Biblio Files Company is the chief competitor of Cover-to-Cover Company in the bookshelf business. Biblio Files is analyzing its
| 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 29e902008026fe4_1 | $fill in the blank 29e902008026fe4_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 29e902008026fe4_3 |
| 4,360 | fill in the blank 29e902008026fe4_4 |
| 6,775 | fill in the blank 29e902008026fe4_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.
Feedback Area
Review the high-low method, and use the smallest and largest levels of production in your computation.
Question Content Area
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 78,800 units during the year.
| Cover-to-Cover Company |
Biblio Files Company |
|
| Contribution margin ratio (percent) | fill in the blank f9737efdf02affb_1% | fill in the blank f9737efdf02affb_2% |
| Unit contribution margin | $fill in the blank f9737efdf02affb_3 | $fill in the blank f9737efdf02affb_4 |
| Break-even sales (units) | fill in the blank f9737efdf02affb_5 | fill in the blank f9737efdf02affb_6 |
| Break-even sales (dollars) | $fill in the blank f9737efdf02affb_7 | $fill in the blank f9737efdf02affb_8 |
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