Question: 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
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 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 $308,200. Every dollar of sales contributes 80 cents toward fixed costs and profit. Both companies have sales of $460,000 per month. Required: a. Compare the two companies' cost structures. SPRING COMPANY WINTERS COMPANY AmountPercentage AmountPercentage Sales Variable cost Contribution margin Fixed costs Operating profit b. Suppose that both companies experience a 15 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
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
