Case Scenario: In MBAA we recognize the role of management accounting in supplying relevant information to support the top management in achieving the strategic objectives of an organization. We describe how internal control procedures can mitigate the risks of financial fraud. Also, we discuss the Balanced Scorecard role in a performance evaluation system. For this group project, you are a team of external consultants hired by the board of directors of Costco wholesale company in MBAA..

You are expected to prepare a report to the board of directors that critically addresses the following: 1) The board would like to understand the cost structure of the company. Review the income statements for the past five years of Costco wholesale company and complete the following: (Provide citations of the sources of your data and formulas used)

a. Estimate the total annual cost formula for the company using the high-low method. Clearly show your steps and formulas to compute the variable cost as percentage of sales and the amount of total annual fixed costs.

b. Estimate the annual required sales in dollars to breakeven based on your formula from requirement (a) above.

c. Assess the margin of safety ratio using the actual sales amount of the most recent year. Advise the board of directors on how safe they should feel about at least breaking-even.

d. Discuss the limitations of your analysis and explain to the board how these limitations can impact your findings