The following income statements illustrate different cost structures for two competing companies: Income Statements Company Name Gibson Franklin Number of customers (a) 81 81 Sales revenue (a × $210) $17,010 $17,010 Variable cost (a × $190) N/A (15,390) Contribution margin 17,010 1,620 Fixed cost (15,390) 0 Net income $1,620 $1,620 Required Reconstruct Gibson’s income statement, assuming that it serves 162 customers when it lures 81 customers away from Franklin by lowering the sales price to $110 per customer. Reconstruct Franklin’s income statement, assuming that it serves 162 customers when it lures 81 customers away from Gibson by lowering the sales price to $110 per customer.
The following income statements illustrate different cost structures for two competing companies: Income Statements Company Name Gibson Franklin Number of customers (a) 81 81 Sales revenue (a × $210) $17,010 $17,010 Variable cost (a × $190) N/A (15,390) Contribution margin 17,010 1,620 Fixed cost (15,390) 0 Net income $1,620 $1,620 Required Reconstruct Gibson’s income statement, assuming that it serves 162 customers when it lures 81 customers away from Franklin by lowering the sales price to $110 per customer. Reconstruct Franklin’s income statement, assuming that it serves 162 customers when it lures 81 customers away from Gibson by lowering the sales price to $110 per customer.
Excel Applications for Accounting Principles
4th Edition
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Gaylord N. Smith
Chapter19: Variable Costing (varcost)
Section: Chapter Questions
Problem 4R: To determine the effect of different levels of production on the company’s income, move to cell B7...
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The following income statements illustrate different cost structures for two competing companies: Income Statements Company Name Gibson Franklin Number of customers (a) 81 81 Sales revenue (a × $210) $17,010 $17,010 Variable cost (a × $190) N/A (15,390) Contribution margin 17,010 1,620 Fixed cost (15,390) 0 Net income $1,620 $1,620 Required Reconstruct Gibson’s income statement, assuming that it serves 162 customers when it lures 81 customers away from Franklin by lowering the sales price to $110 per customer. Reconstruct Franklin’s income statement, assuming that it serves 162 customers when it lures 81 customers away from Gibson by lowering the sales price to $110 per customer.
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