The following income statements illustrate different cost structures for two competing companies: Income Statements Company Name Perez Munoz Number of customers (a) 81 81 Sales revenue (a × $250) $ 20,250 $ 20,250 Variable cost (a × $175) N/A (14,175 ) Variable cost (a × $0) 0 N/A Contribution margin 20,250 6,075 Fixed cost (14,175 ) 0 Net income $ 6,075 $ 6,075 Required Reconstruct Perez’s income statement, assuming that it serves 162 customers when it lures 81 customers away from Munoz by lowering the sales price to $150 per customer. Reconstruct Munoz’s income statement, assuming that it serves 162 customers when it lures 81 customers away from Perez by lowering the sales price to $150 per customer.
The following income statements illustrate different cost structures for two competing companies: Income Statements Company Name Perez Munoz Number of customers (a) 81 81 Sales revenue (a × $250) $ 20,250 $ 20,250 Variable cost (a × $175) N/A (14,175 ) Variable cost (a × $0) 0 N/A Contribution margin 20,250 6,075 Fixed cost (14,175 ) 0 Net income $ 6,075 $ 6,075 Required Reconstruct Perez’s income statement, assuming that it serves 162 customers when it lures 81 customers away from Munoz by lowering the sales price to $150 per customer. Reconstruct Munoz’s income statement, assuming that it serves 162 customers when it lures 81 customers away from Perez by lowering the sales price to $150 per customer.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
The following income statements illustrate different cost structures for two competing companies:
| Income Statements | |||||||
| Company Name | |||||||
| Perez | Munoz | ||||||
| Number of customers (a) | 81 | 81 | |||||
| Sales revenue (a × $250) | $ | 20,250 | $ | 20,250 | |||
| Variable cost (a × $175) | N/A | (14,175 | ) | ||||
| Variable cost (a × $0) | 0 | N/A | |||||
| Contribution margin | 20,250 | 6,075 | |||||
| Fixed cost | (14,175 | ) | 0 | ||||
| Net income | $ | 6,075 | $ | 6,075 | |||
Required
-
Reconstruct Perez’s income statement, assuming that it serves 162 customers when it lures 81 customers away from Munoz by lowering the sales price to $150 per customer.
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Reconstruct Munoz’s income statement, assuming that it serves 162 customers when it lures 81 customers away from Perez by lowering the sales price to $150 per customer.
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