The following are the income statements of two firms in the same industry.

Required:
a. Compute the contribution margin ratio, profit margin ratio, and sales per $ in fixed cost for the two firms.
b. Based on your answers to part (a), identify the strategy (cost leadership versus differentiation) followed by the two firms. Justify your classification. The intent of the question is fine, but the wording is moving from student to academic, followed by €œconjecture€ in yoursolution.

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FirmA Firm B Revenues Variable costs Contribution margin Fixed costs Profit before $500,000 $1,000,000 600,000 $400,000 300,000 re taxes 100,000 00,000 998 225,000 $275,000 175,000