The cost structure of Dennis's Retail Mart is dominated by variable costs with a contribution margin ratio
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Question:
The cost structure of Dennis's Retail Mart is dominated by variable costs with a contribution margin ratio of and fixed costs of $ Every dollar of sales contributes cents toward fixed costs and profit. The cost structure of a competitor, Oakfield Convenience Store, is dominated by fixed costs with a higher contribution margin ratio of and fixed costs of $ Every dollar of sales contributes cents toward fixed costs and profit. Both companies have sales of $ for the year.
Required:
a Compare the two companies' cost structures.
b Suppose that both companies experience a percent increase in sales volume. By how much would each company's profits increase?
Related Book For
Fundamentals of Cost Accounting
ISBN: 978-0077398194
3rd Edition
Authors: William Lanen, Shannon Anderson, Michael Maher
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