Question: The Greenback Stores cost structure is dominated by variable costs with a contribution margin ratio of 0.45 and fixed costs of $107,200. Every dollar of

The Greenback Stores cost structure is dominated by variable costs with a contribution margin ratio of 0.45 and fixed costs of $107,200. Every dollar of sales contributes 45 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 $274,700. Every dollar of sales contributes 70 cents toward fixed costs and profit. Both companies have sales of $670,000 for the month.

Required:

a. Compare the two companies cost structures.

	Greenback-	Store	One-	Mart
	Amount	Percentage	Amount	Percentage
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 companys profits increase?

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