The following income statements illustrate different cost structures for two competing companies: Number of customers (a) Sales revenue (a × $230) Variable cost (a x $185) Contribution margin Fixed cost Net income Income Statements Required Company Name Franklin 89 Gibson 89 $20,470 N/A 20,470 (16,465) $4,005 $20,470 (16,465) 4,005 0 $4,005 a. Reconstruct Gibson's income statement, assuming that it serves 178 customers when it lures 89 customers away from Franklin by lowering the sales price to $130 per customer. b. Reconstruct Franklin's income statement, assuming that it serves 178 customers when it lures 89 customers away from Gibson by lowering the sales price to $130 per customer.
The following income statements illustrate different cost structures for two competing companies: Number of customers (a) Sales revenue (a × $230) Variable cost (a x $185) Contribution margin Fixed cost Net income Income Statements Required Company Name Franklin 89 Gibson 89 $20,470 N/A 20,470 (16,465) $4,005 $20,470 (16,465) 4,005 0 $4,005 a. Reconstruct Gibson's income statement, assuming that it serves 178 customers when it lures 89 customers away from Franklin by lowering the sales price to $130 per customer. b. Reconstruct Franklin's income statement, assuming that it serves 178 customers when it lures 89 customers away from Gibson by lowering the sales price to $130 per customer.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:The following income statements illustrate different cost structures for two competing companies:
Number of customers (a)
Sales revenue (a x $230)
Variable cost (a x $185)
Contribution margin
Fixed cost
Net income
Required
Income Statements
Required A Required B
a. Reconstruct Gibson's income statement, assuming that it serves 178 customers when it lures 89 customers away from Franklin by
lowering the sales price to $130 per customer.
b. Reconstruct Franklin's income statement, assuming that it serves 178 customers when it lures 89 customers away from Gibson by
lowering the sales price to $130 per customer.
Complete this question by entering your answers in the tabs below.
GIBSON COMPANY
Income Statement
Sales revenue
Variable cost
Contribution margin
Fixed cost
Net income (loss)
Reconstruct Gibson's income statement, assuming that it serves 178 customers when it lures 89 customers away from
Franklin by lowering the sales price to $130 per customer.
$
Company Name
Franklin
89
$
Gibson
89
$20,470
N/A
20,470
(16,465)
$4,005
0
$20,470
(16,465)
4,005
0
$4,005
0
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