Match each of the following terms to the appropriatedefinition.
A type of cost that has two components; one that does not changein relation to the volume produced and one that does change inrelation to the volume produced.
Answer 1
A type of cost that does not change in relation to volumeproduced.
Answer 2 A type of cost that changes in relation to volume produced.
Answer 3 Describes a company's cost structure and the effect of fixedcosts on operating income as volume changes.
Answer 4 A fairly accurate calculation to determine the variable andfixed components of a cost.
Answer 5 The excess of sales over break-even revenue.
Answer 6 A method of examining different scenarios by only examiningitems that have changed.
Answer 7 A production level where certain costs remain the same.
Answer 8 The difference between sales per unit and variable costs perunit.
Answer 9
The answers for each one are one of these, Least squaredregression method, Fixed Costs, Incremental Analysis, RelevantRange, Mixed Costs, Operating Leverage, Margin of Safety, Variablecosts, and Contribution Margin per Unit
Match each of the following terms to the appropriatedefinition.
A type of cost that has two components; one that does not changein relation to the volume produced and one that does change inrelation to the volume produced. | Answer 1 |
A type of cost that does not change in relation to volumeproduced. | Answer 2 |
A type of cost that changes in relation to volume produced. | Answer 3 |
Describes a company's cost structure and the effect of fixedcosts on operating income as volume changes. | Answer 4 |
A fairly accurate calculation to determine the variable andfixed components of a cost. | Answer 5 |
The excess of sales over break-even revenue. | Answer 6 |
A method of examining different scenarios by only examiningitems that have changed. | Answer 7 |
A production level where certain costs remain the same. | Answer 8 |
The difference between sales per unit and variable costs perunit. | Answer 9 |
The answers for each one are one of these, Least squaredregression method, Fixed Costs, Incremental Analysis, RelevantRange, Mixed Costs, Operating Leverage, Margin of Safety, Variablecosts, and Contribution Margin per Unit
Related questions
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 | Total | Total | Total Machine |
|---|---|---|---|
| Produced | Lumber Cost | Utilities Cost | Depreciation Cost |
| 4,000 shelves | $48,000 | $5,600 | $130,000 |
| 8,000 shelves | $96,000 | $10,200 | $130,000 |
| 16,000 shelves | $192,000 | $19,400 | $130,000 |
| 20,000 shelves | $240,000 | $24,000 | $130,000 |
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.
| Cost | Fixed Portion of Cost | Variable Portion of Cost (per Unit) |
| Lumber | ||
| Utilities | ||
| Depreciation |
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.
| Month | Number of Units Produced | Total Cost |
|---|---|---|
| January | 4,360 | $65,600 |
| February | 225 | $6,250 |
| March | 1,000 | $15,000 |
| April | 5,475 | $111,250 |
| 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 Units Produced) +
Fixed Cost. Complete the following table.
| Total Fixed Cost | Variable Cost per Unit |
| $ | $ |
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 Costs |
| 3,500 | $ |
| 4,360 | $ |
| 5,475 | $ |
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.
| Cover-to-Cover Company | Biblio Files Company | |
| Contribution margin ratio (percent) | ||
| Unit contribution margin | ||
| Break-even sales (units) | ||
| Break-even sales (dollars) |
| Cover-to-Cover Company |
| Contribution Margin Income Statement |
| For the Year Ended December 31 |
| 1 | Sales | $424,000.00 | ||
| 2 | Variable costs: | |||
| 3 | Manufacturing | $233,200.00 | ||
| 4 | Selling | 21,200.00 | ||
| 5 | Administrative | 63,600.00 | 318,000.00 | |
| 6 | Contribution margin | 106,000.00 | ||
| 7 | Fixed Costs: | |||
| 8 | Manufacturing | $5,000.00 | ||
| 9 | Selling | 4,000.00 | ||
| 10 | Administrative | 33,400.00 | 42,400.00 | |
| 11 | Income from operations | $63,600.00 |
| 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 | 67,840.00 | 254,400.00 | |
| 6 | Contribution margin | 169,600.00 | ||
| 7 | Fixed Costs: | |||
| 8 | Manufacturing | $88,000.00 | ||
| 9 | Selling | 8,000.00 | ||
| 10 | Administrative | 10,000.00 | 106,000.00 | |
| 11 | Income from operations | $63,600.00 |
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 âCombined,â 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.
| Type of Bookshelf | Percent of Sales Mix | Break-Even Sales in Units | Break-Even Sales in Dollars |
| Basic | % | $ | |
| Deluxe | % | $ |
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 $30,000 in the coming year, what must their amount of sales be? $
2. If Biblio Files Company wants to increase its profit by $30,000 in the coming year, what must their amount of sales be? $
