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The following income statements illustrate different cost structures for two competing companies: Number of customers (a) Sales revenue (a $190) Variable cost (a $150)
The following income statements illustrate different cost structures for two competing companies: Number of customers (a) Sales revenue (a $190) Variable cost (a $150) Variable cost (a $0) Contribution margin Fixed cost Net income Income Statements Company Name Ciser Bipe 150 150 $28,500 N/A $ 28,500 (22,500) 0 N/A 28,500 (22,500) 6,000 0 $ 6,000 $ 6,000 Required a. Assume Ciser lowers its sales price to $140 and lures 150 customers away from Bipe. Reconstruct Ciser's income statement assuming sales of 300 units. b. Assume Bipe lowers its sales price to $140 and lures 150 customers away from Ciser. Reconstruct Bipe's income statement assuming sales of 300 units. c. Explain why the price-cutting strategy increased Ciser Company's profits but caused a net loss for Bipe Company.
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