Couzen's Company's cost structure is dominated by variable costs with a contribution margin ratio of 0.26...

 

Transcribed Image Text:

Couzen's Company's cost structure is dominated by variable costs with a contribution margin ratio of 0.26 and fixed costs of $508,500. Every dollar of sales contributes 26 cents toward fixed costs and profit. The cost structure of a competitor, Jones & Fai is dominated by fixed costs with a higher contribution margin ratio of 0.76 and fixed costs of $2,627,250. Every dollar of sales contributes 76 cents toward fixed costs and profit. Both companies have sales of $4,237,500 annually. Required: a. Compare the two companies' cost structures. b. Suppose that both companies experience a 12 percent decrease in sales volume. By how much would each company's profits decrease? Couzen's Company's cost structure is dominated by variable costs with a contribution margin ratio of 0.26 and fixed costs of $508,500. Every dollar of sales contributes 26 cents toward fixed costs and profit. The cost structure of a competitor, Jones & Fai is dominated by fixed costs with a higher contribution margin ratio of 0.76 and fixed costs of $2,627,250. Every dollar of sales contributes 76 cents toward fixed costs and profit. Both companies have sales of $4,237,500 annually. Required: a. Compare the two companies' cost structures. b. Suppose that both companies experience a 12 percent decrease in sales volume. By how much would each company's profits decrease?

Answer rating: 100% (QA)

a Comparing the Two Companies Cost Structures From the information provided we can compare the cost ... View the full answer