(Quiz 2.2) Please help me answer the last question (multiple choice) if you can, all in bold! Thank you!!     Units Produced Total Lumber Cost Total Utilities Cost Total Machine Depreciation Cost 7,000 shelves $70,000    $9,550    $135,000    14,000 shelves 140,000    17,600    135,000    28,000 shelves 280,000    33,700    135,000    35,000 shelves 350,000    41,750    135,000    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 0 10 Utilities 1500 1.15 Depreciation 135000 0 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 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   136,250 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 750 20 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 70750 4,360 87950 6,775 136250 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 80,800 units during the year.   Cover-to-Cover Company Biblio Files Company Contribution margin ratio (percent) 20 40 Unit contribution margin 1 2 Break-even sales (units) 20200 50500 Break-even sales (dollars) 101000 252500 Income Statement - Cover-to-Cover Cover-to-Cover Company Contribution Margin Income Statement For the Year Ended December 31, 20Y8 Sales   $404,000  Variable costs:       Manufacturing expense $242,400     Selling expense 20,200     Administrative expense 60,600 (323,200)   Contribution margin   $80,800  Fixed costs:       Manufacturing expense $5,000     Selling expense 4,000     Administrative expense 11,200 (20,200) Operating income   $60,600  Income Statement - Biblio Files Biblio Files Company Contribution Margin Income Statement For the Year Ended December 31, 20Y8 Sales   $404,000  Variable costs:       Manufacturing expense $161,600     Selling expense 16,160     Administrative expense 64,640 (242,400)   Contribution margin   $161,600  Fixed costs:       Manufacturing expense $83,000     Selling expense 8,000     Administrative expense 10,000 (101,000) Operating income   $60,600  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. Type of Bookshelf Sales Price per Unit Variable Cost per Unit Basic $5.00   $1.75   Deluxe 9.00   8.10   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 $330,330. Recall that the totals of all the sales mix percents must be 100%. Determine the amounts to complete the following table. Type of Bookshelf Percent of Sales Mix Break-Even Sales in Units Break-Even Sales in Dollars Basic       Deluxe       Question Content Area Target Profit 1. If Cover-to-Cover Company wants to increase its profit by $20,000 in the coming year, what must their amount of sales be? $504,000 2. If Biblio Files Company wants to increase its profit by $20,000 in the coming year, what must their amount of sales be? $454,000   3. What would explain the difference between your answers for (1) and (2)? a. Biblio Files Company has a higher contribution margin ratio, and so more of each sales dollar is available to cover fixed costs and provide operating income. b. Cover-to-Cover Company’s contribution margin ratio is lower, meaning that it’s more efficient in its operations. c. The companies have goals that are not in the relevant range. d. The answers are not different; each company has the same required sales amount for the coming year to achieve the desired target profit.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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(Quiz 2.2) Please help me answer the last question (multiple choice) if you can, all in bold! Thank you!!

 

 


Units
Produced
Total
Lumber
Cost
Total
Utilities
Cost
Total Machine
Depreciation
Cost
7,000 shelves $70,000    $9,550    $135,000   
14,000 shelves 140,000    17,600    135,000   
28,000 shelves 280,000    33,700    135,000   
35,000 shelves 350,000    41,750    135,000   

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 0 10
Utilities 1500 1.15
Depreciation 135000 0

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 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   136,250
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
750 20

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 70750
4,360 87950
6,775 136250

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 80,800 units during the year.

  Cover-to-Cover
Company
Biblio Files
Company
Contribution margin ratio (percent) 20 40
Unit contribution margin 1 2
Break-even sales (units) 20200 50500
Break-even sales (dollars) 101000 252500

Income Statement - Cover-to-Cover

Cover-to-Cover Company
Contribution Margin Income Statement
For the Year Ended December 31, 20Y8
Sales   $404,000 
Variable costs:    
  Manufacturing expense $242,400  
  Selling expense 20,200  
  Administrative expense 60,600 (323,200)
  Contribution margin   $80,800 
Fixed costs:    
  Manufacturing expense $5,000  
  Selling expense 4,000  
  Administrative expense 11,200 (20,200)
Operating income   $60,600 

Income Statement - Biblio Files

Biblio Files Company
Contribution Margin Income Statement
For the Year Ended December 31, 20Y8
Sales   $404,000 
Variable costs:    
  Manufacturing expense $161,600  
  Selling expense 16,160  
  Administrative expense 64,640 (242,400)
  Contribution margin   $161,600 
Fixed costs:    
  Manufacturing expense $83,000  
  Selling expense 8,000  
  Administrative expense 10,000 (101,000)
Operating income   $60,600 

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.

Type of
Bookshelf
Sales Price
per Unit
Variable Cost
per Unit
Basic $5.00   $1.75  
Deluxe 9.00   8.10  

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 $330,330. Recall that the totals of all the sales mix percents must be 100%. Determine the amounts to complete the following table.

Type of Bookshelf Percent of Sales Mix Break-Even Sales in Units Break-Even Sales in Dollars
Basic      
Deluxe      

Question Content Area

Target Profit

1. If Cover-to-Cover Company wants to increase its profit by $20,000 in the coming year, what must their amount of sales be?

$504,000

2. If Biblio Files Company wants to increase its profit by $20,000 in the coming year, what must their amount of sales be?

$454,000

 

3. What would explain the difference between your answers for (1) and (2)?

a. Biblio Files Company has a higher contribution margin ratio, and so more of each sales dollar is available to cover fixed costs and provide operating income.

b. Cover-to-Cover Company’s contribution margin ratio is lower, meaning that it’s more efficient in its operations.

c. The companies have goals that are not in the relevant range.

d. The answers are not different; each company has the same required sales amount for the coming year to achieve the desired target profit.

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Thank you for the help! I was wondering if you could also answer the other bold question not far above it about the sales mix and break-even sales?

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