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 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.
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 Costs
3,500
4,360
5,475
3. Why does the total cost computed for 4,360 units not match the data for January in the table at the top of this panel?
A. 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.
B. The High-Low method only gives accurate data when fixed costs are zero.
C. The High-Low method is accurate only for months in which production is at full capacity.
D. The High-Low method gives accurate data only for levels of production outside the relevant range.
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)
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 BookshelfSales Price per UnitVariable Cost per Unit
Basic $5.00 $1.75
Deluxe $9.00 $8.10
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.
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?
2. If Biblio Files Company wants to increase its profit by $20,000 in the coming year, what must their amount of sales be?