Refer again to the income statements for Cover-to-Cover Company and Biblio Files Company on their respective Income Statement panels. Note that both companies have the same sales and net income. Answer questions (1) - (3) that follow, assuming that all data for the coming year is the same as the current year, except for the amount of sales. If required, round answers to the nearest dollar.

1. If Cover-to-Cover Company wants to increase its profit by $40,000 in the coming year, what must their amount of sales be?

2. If Biblio Files Company wants to increase its profit by $40,000 in the coming year, what must their amount of sales be?

3. What would explain the difference between your answers for (1) and (2)?

Cover-to-Cover Companys contribution margin ratio is lower, meaning that its more efficient in its operations.

The answers are not different; each company has the same required sales amount for the coming year to achieve the desired target profit.

The companies have goals that are not in the relevant range.

Biblio Files Company has a higher contribution margin ratio, and so more of each sales dollar is available to cover fixed costs and provide income from operations.