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

Required
a. Reconstruct Vector's income statement, assuming that it serves 140 customers when it lures 70 customers away from Sector by lowering the sales price to $120 per customer.
b. Reconstruct Sector's income statement, assuming that it serves 140 customers when it lures 70 customers away from Vector by lowering the sales price to $120 per customer.
c. Explain why the price-cutting strategy increased Vector Company's profits but caused a net loss for SectorCompany.

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Income Statements Company Name Vector Sector Number of customers (a) Variable cost (a x S160) Variable cost (a x $0) Contribution margin Fixed cost Net income 70 Sales revenue (a x $200) $14,000 N/A 70 $14,000 (11,200) N/A 2,800 14,000 (11,200) 2,800 2 2,800