Question: The Greenback Store's cost structure is dominated by variable costs with a contribution margin ratio of 0.40 and fixed costs of $63,900. Every dollar of


The Greenback Store's cost structure is dominated by variable costs with a contribution margin ratio of 0.40 and fixed costs of $63,900. 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 0.70 and fixed costs of $276,900. Every dollar of sales contributes 70 cents toward fixed costs and profit. Both companies have sales of $710,000 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 Amount Percentage % ONE-MART Amount Percentage % Sales Variable cost Contribution margin Fixed costs Operating profit % % % % Required A Required B > Complete this question by entering your answers in the tabs below. Required A Required B 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 Required A Required B
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
