The Greenback Stores cost structure is dominated by variable costs with a contribution margin ratio of 0.30 and fixed costs of $57,200. Every dollar of sales contributes 30 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 0.70 and fixed costs of $233,200. Every dollar of sales contributes 70 cents toward fixed costs and profit. Both companies have sales of $440,000 for the month.

Required:

a. Compare the two companies cost structures.

	GREENBACK STORE			ONE MART STORE
	Amount	Percentage		Amount	Percentage
Sales
Variable Costs
Contribution Margin
Fixed Cost
Operating Profit

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