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LC Exercise 2-12B Effect of cost structure on projected profits Standard and Variant compete in the same market. The following budgeted income statements illus- trate
LC Exercise 2-12B Effect of cost structure on projected profits Standard and Variant compete in the same market. The following budgeted income statements illus- trate their cost structures: Income Statements Number of customers (a) Sales revenue (a x $160) Variable cost (a x $90) Contribution margin Fixed costs Net income Company Standard Variant 150 150 $24,000 $24,000 N/A (13,500) 24,000 10,500 (13,500) N/A $10,500 $10.500 Required a. Assume that Standard can lure all 150 customers away from Variant by lowering its sales price to $85 per customer. Reconstruct Standard's income statement based on 300 customers. b. Assume that Variant can lure all 150 customers away from Standard by lowering its sales price to $85 per customer. Reconstruct Variant's income statement based on 300 customers. c. Why does the price-cutting strategy increase Standard's profits but result in a net loss for Variant
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