Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Exercise 3-36 (Static) Analysis of Cost Structure (LO 3-2) The cost structure of Dennis's Retail Mart is dominated by variable costs with a contribution margin
Exercise 3-36 (Static) Analysis of Cost Structure (LO 3-2) The cost structure of Dennis's Retail Mart is dominated by variable costs with a contribution margin ratio of 0.30 and fixed costs of $60,000. Every dollar of sales contributes 30 cents toward fixed costs and profit. The cost structure of a competitor, Oakfield Convenience Store, is dominated by fixed costs with a higher contribution margin ratio of 0.70 and fixed costs of $540,000. Every dollar of sales contributes 70 cents toward fixed costs and profit. Both companies have sales of $1,200,000 for the year. 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? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Suppose that both companies experience a 20 percent increase in sales volume. By how much would each company's profits increase? Exercise 3-36 (Static) Analysis of Cost Structure (LO 3-2) The cost structure of Dennis's Retail Mart is dominated by variable costs with a contribution margin ratio of 0.30 and fixed costs of $60,000. Every dollar of sales contributes 30 cents toward fixed costs and profit. The cost structure of a competitor, Oakfield Convenience Store, is dominated by fixed costs with a higher contribution margin ratio of 0.70 and fixed costs of $540,000. Every dollar of sales contributes 70 cents toward fixed costs and profit. Both companies have sales of $1,200,000 for the year. 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? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Suppose that both companies experience a 20 percent increase in sales volume. By how much would each company's profits increase
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started