Question: Spring Companys cost structure is dominated by variable costs with a contribution margin ratio of 0.30 and fixed costs of $100,800. Every dollar of sales

Spring Companys cost structure is dominated by variable costs with a contribution margin ratio of 0.30 and fixed costs of $100,800. Every dollar of sales contributes 30 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 $292,800. Every dollar of sales contributes 70 cents toward fixed costs and profit. Both companies have sales of $480,000 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 companys profits increase?

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 0.30 and fixed costs of $38,500. Every dollar of sales contributes 30 cents toward fixed costs and...

Spring Company's cost structure is dominated by variable costs with a contribution margin ratio of 0.30 and fixed costs of $100.800 Every dollar of sales contributes 30 cents toward fixed costs and...

Spring Companys cost structure is dominated by variable costs with a contribution margin ratio of 0.30 and fixed costs of $102,000. Every dollar of sales contributes 30 cents toward fixed costs and...

EX 3-35 Spring Companys cost structure is dominated by variable costs with a contribution margin ratio of 0.30 and fixed costs of $102,000. Every dollar of sales contributes 30 cents toward fixed...

Spring Company's cost structure is dominated by variable costs with a contribution margin ratio of 0.30 and fixed costs of $102.000 Every dollar of sales contributes 30 cents toward fixed costs and...

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? Spring Companys cost...

Spring Company's cost structure is dominated by variable costs with a contribution margin ratio of 0.40 and fixed costs of $113.400. Every dollar of sales contributes 40 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...

Excavator Ltd had two areas of interest, Site A and Site B. The following costs were incurred to each area of interest during year 2019: Year Site A Site B ($ million) ($ million) 2019 Cash paid to...

Question 4 Consider following optimisation problem: 1 f(x) = 2x1x2 +5 x2 21-n x2 2x - 12/24 Minimise subject to [30 marks] (a) (5 marks) Write down the Karush-Kuhn-Tucker (KKT) conditions for this...

A company uses that to buy another company. Such an event is called a leverage buyout.

The first scenario will be a Verbal Judo scenario in which your scenario follows the standard Verbal Judo interaction: You need to ask somebody to modify their behavior either to do something or to...

6. Assume you are in charge of establishing a training program for supervisors in administering discipline. Based on the supervisors potential role in the disciplinary process, formulate and discuss...

1. Wrongful Discharge. A reference is made in this chapter to a RAND study on the economic consequences of wrongful termination. Find an abstract of the study on RANDs Web site. What effect does the...

4. Seven Tests for Just Cause. A common test for determining whether just cause exists for imposing disciplinary actions was developed by arbitrator Carroll Daugherty in 1966. The standard is known...