Question

The following income statements illustrate different cost structures for two competing companies:


Required
a. Reconstruct Kent’s income statement, assuming that it serves 200 customers when it lures 100 customers away from Trent by lowering the sales price to $150 per customer.
b. Reconstruct Trent’s income statement, assuming that it serves 200 customers when it lures 80 customers away from Kent by lowering the sales price to $150 per customer.
c. Explain why the price-cutting strategy increased Kent Company’s profits but caused a net loss for TrentCompany.


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  • CreatedFebruary 07, 2014
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