Purchase Solution

Used Books Company: Variable Costs Income Statement

Not what you're looking for?

Ask Custom Question

The Used Books Company is a small online retailer operating out of a garage apartment. The owner buys books at garage sales, thrift shops, library sales, and whenever an opportunity arises. The company classified all books into five categories based on cost of acquisition and estimated sales price. See below for details about books purchased and sold during the last year (20XX).

Price Categories

Units Sold 2,000 1,000 500 400 400
Units Purchased 3,000 1,200 1,000 1,000 1,000

Resale Price $4.00 $15.00 $25.00 $45.00 $40.00
Cost $0.50 $5.00 $10.00 $20.00 $20.00

In addition to purchasing inventory (used books), The Used Book Store incurs some operating expenses.

Variable operating expenses
Shipping per book $ 1.50

Fixed expenses
Internet-related costs $5,000
Travel, etc. 2,000
Advertising 1,000
Other overhead 3,000

- Prepare a variable costing (behavioral) income statement for the company in good format.
- Prepare a second variable costing statement assuming 90% of all the books in each category purchased were actually sold.
- Prepare a third variable costing statement assuming that the price is increased by 50% for all five categories (use original sales information).
- What type of information do you derive from the income statements you prepared above? The owner enjoys the used-book business. Any suggestions as how to turn this into a full-time business venture so the owner can quit his other job?

Purchase this Solution

Solution Summary

Your tutorial is in excel, attached. Click in cells to see computation. The layout is the instruction so study the pattern.

Solution Preview

Your tutorial is in excel, attached. Click in cells to see computation. The layout is the instruction so study the pattern.

All of the product lines have a strong ...

Solution provided by:
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
Recent Feedback
  • "hey just wanted to know if you used 0% for the risk free rate and if you didn't if you could adjust it please and thank you "
  • "Thank, this is more clear to me now."
  • "Awesome job! "
  • "ty"
  • "Great Analysis, thank you so much"
Purchase this Solution

Free BrainMass Quizzes
Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

Transformational Leadership

This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.

Operations Management

This quiz tests a student's knowledge about Operations Management

Six Sigma for Process Improvement

A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.