Clever, Inc., is a car manufacturer. Its 2008 income statement is as follows:
Clever, Inc.Income Statement For the Year Ended
December 31, 2008
Sales revenue....................................$20,000
Less cost of goods sold..........................10,000
Gross margin....................................$10,000
Expenses............................................8,000
Net income.......................................$ 2,000
Alexander, Inc., is a car rental agency based in Florida. Its 2008 income statement is as follows:
Alexander, Inc.Income Statement For the Year Ended
December 31, 2008
Sales revenue.................................$20,000
Expenses.......................................15,000
Net income....................................$ 5,000
During 2008, both Clever, Inc., and Alexander, Inc., incurred a $1,000 fraud loss.
1. How much additional revenue must each company generate to recover the losses from the fraud?
2. Why are these amounts different?
3. Which company will probably have to generate less revenue to recover the losses?