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 6,000 shelves $72,000    $8,400    $125,000    12,000 shelves 144,000    15,300    125,000    24,000 shelves 288,000    29,100    125,000    30,000 shelves 360,000    36,000    125,000    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 be9a95feb00a004_4 $fill in the blank be9a95feb00a004_5 Utilities fill in the blank be9a95feb00a004_6 fill in the blank be9a95feb00a004_7 Depreciation fill in the blank be9a95feb00a004_8 fill in the blank be9a95feb00a004_9

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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
6,000 shelves $72,000    $8,400    $125,000   
12,000 shelves 144,000    15,300    125,000   
24,000 shelves 288,000    29,100    125,000   
30,000 shelves 360,000    36,000    125,000   

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 be9a95feb00a004_4 $fill in the blank be9a95feb00a004_5
Utilities fill in the blank be9a95feb00a004_6 fill in the blank be9a95feb00a004_7
Depreciation fill in the blank be9a95feb00a004_8 fill in the blank be9a95feb00a004_9
 

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 7,775   156,250
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
$fill in the blank 7a0fe7064f8101e_1 $fill in the blank 7a0fe7064f8101e_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 7a0fe7064f8101e_3
4,360 fill in the blank 7a0fe7064f8101e_4
7,775 fill in the blank 7a0fe7064f8101e_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.

 
 
 
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