Chapter 2, Problem 12EB 1 Bookmark Show all steps: ON Effect of cost structure on projected profits Standard and Variant compete in the same market. The following budgeted income statements illustrate their cost structures: Income Statements Company Standard Variant Number of customers (a) 150 150 Sales revenue (ax $160) $24.000 $24,000 Variable cost (a x $90) NA (13,500) Contribution margin 24,000 10,500 Fixed costs (13,500) NA Net income $10.500 $10,500 Required a. Assume that Standard can lure all 150 customers away from Variant by lowering its sales price to $85 per customer. Reconstruct Standard's income statement based on 300 customers. b. Assume that Variant can lure all 150 customers away from Standard by lowering its sales price to $85 per customer. Reconstruct Variant's income statement based on 300 customers. c. Why does the price-cutting strategy increase Standard's profits but result in a net loss for Variant