Question: The Greenback Store's cost structure is dominated by variable costs with a contribution margin ratio of 0.40 and fixed costs of $46,200. Every dollar of

 The Greenback Store's cost structure is dominated by variable costs witha contribution margin ratio of 0.40 and fixed costs of $46,200. Every

The Greenback Store's cost structure is dominated by variable costs with a contribution margin ratio of 0.40 and fixed costs of $46,200. Every dollar of sales contributes 40 cents toward fixed costs and profit. The cost structure of a competitor, One-Mart, is dominated by fixed costs with a higher contribution margin ratio of 0.80 and fixed costs of $354,200. Every dollar of sales contributes 80 cents toward fixed costs and profit. Both companies have sales of $770,000 for the 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. GREENBACK STORE ONE-MART Amount Percentage 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? Greenback Store's profits increase by One-Mart'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!