1. What is Blue Nile's strategy for success in the marketplace? Does the company rely primarily on a customer intimacy,operational excellence or product leadership customer value proposition?What evidence from 10-K support your conclusion?

2.What business risks does Blue Nile face that may threaten its ability to satisfy stockholder expectation? What are some examples of control activities that the company could use to reduce these risks? Are some of the risks faced by Blue Niles difficult to reduce through control activities? Explain.

3. Is Blue Niles a merchandiser or a manufacturer? What information contained in the 10-K supports your answer?

4.Using account analysis,would you label cost of sales and selling,general and administrative expense as variable,mixed or fixed costs?Why?Cite one example of a variable cost,step-variable cost,discretionary fixed cost and committed fixed cost for Blue Nile.

5.Using the information from the 10-K and the high-low method,estimate the variable and fixed cost elements of the quarterly selling,general and administrative expense.Express Blue Niles' variable and fixed selling,general and administrative expenses in the form Y=a+b.X,where X is net sales.

6. Prepare a contribution format income statement for the third quarter of 2005 assuming that Blue Niles' net sales were 45,500$ and its cost of sales as a percentage of net sales remained unchanged from the prior quarter.

7. How would you describe Blue Niles' cost structure?Is Blue Niles' cost of sales higher or lower than competitors with bricks and mortar jewelry store? "