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Exercise 2-12A (Algo) Using fixed cost as a competitive business strategy LO 2-1,2-2 The...

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Accounting

Exercise 2-12A (Algo) Using fixed cost as a competitive business strategy LO 2-1,2-2
The following income statements illustrate different cost structures for two competing companies:
Income Statements
Company Name
Baird Adams
Number of customers (a)8686
Sales revenue (a \times $240) $20,640 $20,640
Variable cost (a \times $175) N/A (15,050)
Contribution margin 20,6405,590
Fixed cost (15,050)0
Net income $5,590 $5,590
Required
Reconstruct Bairds income statement, assuming that it serves 172 customers when it lures 86 customers away from Adams by lowering the sales price to $140 per customer.
Reconstruct Adamss income statement, assuming that it serves 172 customers when it lures 86 customers away from Baird by lowering the sales price to $140 per customer.

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