Question
Spring Company's cost structure is dominated by variable costs with a contribution margin ratio of 0.25 and fixed costs of $57,200. Every dollar of
Spring Company's cost structure is dominated by variable costs with a contribution margin ratio of 0.25 and fixed costs of $57,200. Every dollar of sales contributes 25 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 $255,200. Every dollar of sales contributes 70 cents toward fixed costs and profit. Both companies have sales of $440,000 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 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 Contribution margin Fixed costs Operating profit SPRING COMPANY WINTERS COMPANY Amount Percentage Amount Percentage Reodred A Required B >
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