fundamentals managerial accounting

Chapter 02 - Cost Behavion, Operating Levernge, and Profitability Analysis tration Problem 2-2 Erfect of Cost Structure lostream, Inc. / Downstream, Inc. Demonst Upstream, Inc. and Downstream, Inc. provide rafting tours on Big Bear River. Upstream prys tour guides fixed salaries. It budgets salaries expense at $160.000 Downstream pays tour guides $40 per rafter served. Rafters are charged $50 per tour. Both companies expect to carry approximately 4,000 rafters during the year per year Required a. Prepare budgeted annual income statements for the two companies b. In an effort to lure rafters away fom Downstream, Inc., Upstream, Inc. lowers the rafter to $39. Prepare revised income statements for both companies. Assume that Upstream serves 6,000 rafters who each pay $39 per tour, while Downstream serves only 2,000 rafters who pay $50 per tour Assume you are president of Downstream, Inc. Offer defensive strategies. Suppose Downstream, Inc. matches the $39 price set by Upstream, Inc. Prepare income statements for both companies assuming that each company serves 4,000 customers