Question: The Greenback Store'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

 The Greenback Store's cost structure is dominated by variable costs with

The Greenback Store'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 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 $258,500. Every dollar of sales contributes 70 cents toward fixed costs and profit. Both companies have sales of $550,000 for the month. Required: a. Compare the two companies'cost structures GREENBACK STORE ONE-MART Amount Percentage Amount Sales Variable cost Contribution margin Fixed costs Operating profit b. Suppose that both companies experience a 20 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 b

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!

Q:

\f