Preparation of an Income Statement for The Serious Reader Company

Anonymous
timer Asked: Jan 4th, 2019
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Question description

Complete question is in the attached word document.

  • 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.

Module 1 – Case Accounting Cost Systems and Cost BehaviorCOST SYSTEMS AND COST BEHAVIORSYSTEMS AND COSTVIOR Assignment Overview Preparation of an Income Statement for The Serious Reader Company The first case of this course provides an opportunity to prepare a segmented variable costing (contribution margin, behavioral) income statement and analyze the information. This is a very small company and the information may seem simplistic at first glance. Don’t forget that numbers and hands-on practice best illustrate many basic accounting concepts. The Serious Reader 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 classifies 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 4,000 Unites Purchased 6,000 Units Sold C D E 1,000 500 400 400 1,200 1,000 1,000 1,000 Resale Price $4.00 $12.00 $20.00 $45.00 $60.00 Cost $0.50 $4.00 $10.00 $20.00 $20.00 In addition to purchasing inventory (used books), the company incurs some operating expenses. Variable Operating Expenses Shipping per book $1.50 Common fixed expenses Internet-related costs $10,000 Travel, etc. $4,000 Advertising $1,000 Other overhead $5,000 Case Assignment Required: 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 4- or 5-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. Use headings. Maximum length of two 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. Assignment Expectations 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.

Tutor Answer

DoctorDickens
School: Rice University

Hey there! Have done the excel. Working on the memo and the short essay.

Income Statement for The Serious Reader Company
A
B
C
D
E
Total
4,000
1,000
500
400
400
6,000
1,200
1,000
1,000
1,000
$4.00
$12.00
$20.00
$45.00
$60.00
$0.50
$4.00
$10.00
$20.00
$20.00
$1.50
$1.50
$1.50
$1.50
$1.50
16000
12000
10000
18000
24000
80000
3000
4000
5000
8000
8000
28000
6000
1500
750
600
600
9450
7000
6500
4250
9400
15400
42550

Units sold
Units purchased
Resale Price
Cost
Shipping per book
Sales
Purchases
Shipping cost
Contribution
Less Fixed Cost
Internet-related costs
Travel, etc.
Advertising
Other overhead
Total Fixed Cost
Net income

$10,000
$4,000
$1,000
$5,000
$20,000
$22,550

Second variable costing statement assuming 90% of all the books in each category purchased were actually sold
A
B
C
D
E
Total
Units sold
5400
1080
900
900
900
Units purchased
6,000
1,200
1,000
1,000
1,000
Resale Price
$4.00
$12.00
$20.00
$45.00
$60.00
Cost
$0.50
$4.00
$10.00
$20.00
$20.00
Shipping per book
$1.50
$1.50
$1.50
$1.50
$1.50
Sales
21600
12960
18000
40500
54000 147060
Purchases
3000
4800
10000
20000
20000
57800
Shipping cost
8100
1620
1350
1350
1350
13770
Contribution
10500
6540
6650
19150
32650
75490
Less Fixed Cost
Internet-related costs
$10,000
Travel, etc.
$4,000
Advertising
$1,000
Other overhead
$5,000
Total Fixed Cost
$20,000
Net income
$55,490
Third variable costing statement assuming that the price is increased by 50% for all five categories
A
B
C
D
E
Total
Units sold
4,000
1,000
500
400
400
Units purchased
6,000
1,200
1,000
1,000
1,000
Resale Price
6
18
30
67.5
90

Cost
Shipping per book
Sales
Purchases
Shipping cost
Contribution
Less Fixed Cost
Internet-related co...

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Anonymous
Posted this and got four bids within 15 minutes. Clearly lots of tutors on the platform, quality was pretty legit too.

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