Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Spring Company's cost structure is dominated by variable costs with a contribution margin ratio of 0.45 and fixed costs of $78,000. Every dollar of

image text in transcribedimage text in transcribed

Spring Company's cost structure is dominated by variable costs with a contribution margin ratio of 0.45 and fixed costs of $78,000. 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 0.80 and fixed costs of $305,500. Every dollar of sales contributes 80 cents toward fixed costs and profit. Both companies have sales of $650,000 per 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. Sales Variable cost SPRING COMPANY Amount Percentage WINTERS COMPANY Amount Percentage Contribution margin % % Fixed costs Operating profit

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting

Authors: Charles E. Davis, Elizabeth Davis

2nd edition

1118548639, 9781118800713, 1118338448, 9781118548639, 1118800710, 978-1118338445

Students also viewed these Accounting questions

Question

=+19. For the regression model for the bookstore of Exercise 1,

Answered: 1 week ago

Question

Explain all drawbacks of the application procedure.

Answered: 1 week ago