Spring Companys 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, Winters Company, 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 per 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 companys profits increase?