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    Used Books Company: Variable Costs Income Statement

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    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

    A B C D E
    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

    Required:
    - 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?

    © BrainMass Inc. brainmass.com May 20, 2020, 10:56 pm ad1c9bdddf
    https://brainmass.com/business/financial-statements/used-books-company-variable-costs-income-statement-542572

    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 Summary

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

    $2.19

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