Question: Spring Companys cost structure is dominated by variable costs with a contribution margin ratio of 0.25 and fixed costs of $57,200. Every dollar of sales

Spring Companys cost structure is dominated by variable costs with a contribution margin ratio of 0.25 and fixed costs of $57,200. 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 0.70 and fixed costs of $255,200. Every dollar of sales contributes 70 cents toward fixed costs and profit. Both companies have sales of $440,000 per month.

a. Compare the two companies cost structures.

b. Suppose that both companies experience a 20 percent increase in sales volume. By how much would each companys profits increase?

Compare the two companies cost structures.

	SPRING COMPANY			WINTERS COMPANY
	Amount	Percentage		Amount	Percentage
Sales			%			%
Variable cost
Contribution margin			%			%
Fixed costs
Operating profit			%			%

Suppose that both companies experience a 20 percent increase in sales volume. By how much would each companys profits increase?


Spring Companys profits increase by
Winter Company's profits increase by

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!

Spring Company's cost structure is dominated by variable costs with a contribution margin ratio of 0.25 and fixed costs of $146,000. Every dollar of sales contributes 25 cents toward fixed costs and...

Spring Company's cost structure is dominated by variable costs with a contribution margin ratio of 0.25 and fixed costs of $20,000. Every dollar of sales contributes 25 cents toward fixed costs and...

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...

Spring Company's cost structure is dominated by variable costs with a contribution margin ratio of 0.25 and fixed costs of $55,200. Every dollar of sales contributes 25 cents toward fixed costs and...

Spring Companys cost structure is dominated by variable costs with a contribution margin ratio of 0.25 and fixed costs of $120,000. Every dollar of sales contributes 25 cents toward fixed costs and...

Spring Company's cost structure is dominated by variable costs with a contribution margin ratio of 0.25 and fixed costs of $100,000. Every dollar of sales contributes 25 cents toward fixed costs and...

Spring Company's cost structure is dominated by variable costs with a contribution margin ratio of 0.25 and fixed costs of $115,500. Every dollar of sales contributes 25 cents toward fixed costs and...

Spring Company's cost structure is dominated by variable costs with a contribution margin ratio of 0.25 and fixed costs of $120,000. Every dollar of sales contributes 25 cents toward fixed costs and...

Can travel expenses to and from rental property be deducted? If so, what are the rules concerning the deductibility of travel, and how is the deduction calculated?

Modern Building Supply sells various building materials to retail outlets. The company has just approached Linden State Bank requesting a $300,000 loan to strengthen the Cash account and to pay...

Rocky owns a $ 1 9 4 , 0 0 0 town house and still has an unpaid mortgage of $ 1 5 9 , 0 0 0 . In addition to his mortgage, he has the following liabilities: \ table [ [ Visa , $ 9 0 5

Technology. During the past few weeks, youve received manytoo manye-mails that contain chain letters, jokes, recipes, and other nonbusiness material. An occasional message of this nature is a nice...

Teamwork. Work with one other student. Exchange the messages you wrote in Exercise 7 and read them silently, then aloud.Discuss whether and how the tone you thought you used in your message...

Global. Technology. Access the home page of two companies based in countries other than the United States and two similar companies in the United States (e.g., financial institutions, airlines). In...