Question

The following income statements show equal net income even though quite different cost structures exist for the two companiesRequired A Required B Reconstruct Rundles income statement, assuming that it serves 174 customers when it lures 87 customersReconstruct Perezs income statement, assuming that it serves 174 customers when it lures 87 customers away from Rundle by lo

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Answer #1

RUNDLE company reconstructed income statement

Income statement
Sales revenue =174*$140 $24360
Less variable cost $0
Contribution margin $24360
Less :fixed cost $16095
Net income $8265

PEREZ company reconstructed income statement

Income statement
Sales revenue =174 *$140 $24360
Less :Variable cost=174*$185 $32190
Contribution margin -$7830
Less :fixed cost 0
Net loss -$7830
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