Using fixed cost as a competitive business strategy The following income statements illustrate different cost structures for two competing companies.

Required

a. Reconstruct Sander’s income statement, assuming that it serves 160 customers when it lures 80 customers away from Norland by lowering the sales price to $150 per customer.

b. Reconstruct Norland’s income statement, assuming that it serves 160 customers when it lures 80 customers away from Sander by lowering the sales price to $150 per customer.

c. Explain why the price-cutting strategy increased Sander Company’s profits but caused a net loss for Norland Company.