Part B

Spring Company's cost structure is dominated by variable costs with a contribution margin ratio of 0.25 and fixed costs of $63,000. Every dollar of sales contributes 25 cents toward fixed costs and profit. The cost structure of a competitor, Winters Company, is dominated by fixed costs with a higher contribution margin ratio of 0.80 and fixed costs of $294,000. Every dollar of sales contributes 80 cents toward fixed costs and profit. Both companies have sales of $420,000 per month. Required: a. Compare the two companies' cost structures. b. Suppose that both companies experience a 10 percent increase in sales volume. By how much would each company's profits increase? Complete this question by entering your answers in the tabs below. Required A Required B Compare the two companies' cost structures. SPRING COMPANY Amount Percentage WINTERS COMPANY Amount Percentage Sales Variable cost Contribution margin Fixed costs Operating profit % Suppose that both companies experience a 10 percent increase in sales volume. By how much would each company's profits increase? Spring Company's profits increase by Winter Company's profits increase by