Company Name: Costco wholesale Company

You are expected to prepare a report to the board of directors that critically addresses the following: The board would like to understand the cost structure of the company. Review the income statements for the past five years 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.