The cost structure of Dennis's Retail Mart is dominated by variable costs with a contribution margin ratio of $0\mathrm{.}30$ and fixed costs of $$98,880.$ Every dollar of sales contributes $30$ cents toward fixed costs and profit. The cost structure of a competitor, Oakfield Convenience Store, is dominated by fixed costs with a higher contribution margin ratio of $0\mathrm{.}70$ and fixed costs of $$556,200.$ Every dollar of sales contributes $70$ cents toward fixed costs and profit. Both companies have sales of $$1,236,000$ for the year.

Required:

a$.$ Compare the two companies' cost structures.

b$.$ Suppose that both companies experience a $15$ 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.

Compare the two companies' cost structures.