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Exercise 3-34 (Algo) Analysis of Cost Structure (LO 3-2) The Greenback Store's cost structure is dominated by variable costs with a contribution margin ratio of
Exercise 3-34 (Algo) Analysis of Cost Structure (LO 3-2) The Greenback Store's cost structure is dominated by variable costs with a contribution margin ratio of 0.40 and fixed costs of $58,400. 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 $350,400. Every dollar of sales contributes 80 cents toward fixed costs and profit. Both companies have sales of S730,000 for the month. Required: a. Compare the two companies' cost structures. b. Suppose that both companies experience a 20 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 96 ONE MART Amount Percentage Sales Variable cost Contribution margin Foxed costs Operating profit increase? Complete this question by entering your answers in the tabs Required A Required B Suppose that both companies experience a 20 percent increase in sale increase? Greenback Store's profits increase by One-Mart's profits increase by
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