Computations (use Excel)
• Prepare a segmented 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).
• 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? Prepare another income statement to support your idea.
Memo (use Word)
Interpret the results from the computations and explain how the information is useful. Write a four or five paragraph memo to the owner of the business. Start with an introduction and end with a recommendation. Each of the four or five paragraphs should have a heading.
Short essay to comment on the questions below (use Word). Start with an introduction and end with a summary or conclusion. Must use headings for paragraphs. Maximum length of three pages.
• Why do many organizations make the effort to prepare a different type of income statement for internal purposes?
• Variable costing is not just about preparing income statements. Provide at least three scenarios in which understanding how costs behave is useful.
Each submission should include two files: (1) An Excel file; and (2) A Word document. The Word document shows the memo first and short essay last. Assume a knowledgeable business audience and use required format and length. Individuals in business are busy and want information presented in an organized and concise manner.