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 Refer again to the income statements for Cover-to-Cover Companyand Biblio Files Company on their respective Income Statementpanels. Note that both companies have the same sales and netincome. Answer questions (1) - (3) that follow, assuming that alldata for the coming year is the same as the current year, exceptfor the amount of sales. If required, round answers to the nearestdollar. 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? Points: 1 / 1 Feedback Check My Work Examine the differences between the two companies, including thedifferences in elements of the target profit formula. Explanation 2. If Biblio Files Company wants to increase its profit by$30,000 in the coming year, what must their amount of sales be? Points: 0 / 1 Feedback Check My Work Examine the differences between the two companies, including thedifferences in elements of the target profit formula. Explanation 3. What would explain the difference between your answers for(1) and (2)? The answers are not different; each company has the samerequired sales amount for the coming year to achieve the desiredtarget profit. The companies have goals that are not in the relevantrange.Selection incorrect. Group correctness is false. Cover-to-Cover Company’s contribution margin ratio is lower,meaning that it’s more efficient in its operations. Biblio Files Company has a higher contribution margin ratio, andso more of each sales dollar is available to cover fixed costs andprovide income from operations.