Spring and Summer compete in the same market. The following budgeted income statements illustrate their cost structures:

Required
a. Assume that Spring can lure all 100 customers away from Summer by lowering its sales price to $85 per customer. Reconstruct Spring€™s income statement based on 200 customers.
b. Assume that Summer can lure all 100 customers away from Spring by lowering its sales price to $85 per customer. Reconstruct Summer€™s income statement based on 200 customers.
c. Why does the price-cutting strategy increase Spring€™s profits but result in a net loss forSummer?

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Income Statements Company Spring Summer 100 Number of customers (a) Sales revenue (a x $160) 16,000 $16,000 Variable cost (a x $90) Contribution margin Fixed costs Net income 100 (9,000) 7,000 (9,000)N/A $ 7,000 7,000 NA 16,000