Published on October 20, 2015
For more course tutorials visit www.acc543.com Exercise 15-12B Effect of cost structure on projected profits Logan and Martin compete in the same market. The following budgeted income statements illustrate their cost structures. Required a. Assume that Logan can lure all 80 customers away from Martin by lowering its sales price to $75 per customer. Reconstruct Logan’s income statement based on 160 customers. b. Assume that Martin can lure all 80 customers away from Logan by lowering its sales price to $75 per customer. Reconstruct Martin’s income statement based on 160 customers. c. Why does the price-cutting strategy increase Logan’s profits but result in a net loss for Martin?