The cost structure of Dennis's Retail Mart is dominated by variable costs with a contribution margin ratio of 0.32 and fixed costs of $97,280. Every dollar of sales contributes 32 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 0.68 and fixed costs of $571,520. Every dollar of sales contributes 68 cents toward fixed costs and profit. Both companies have sales of $1,216,000 for the year.

Required:

1. Compare the two companies cost structures.
2. Suppose that both companies experience a 20 percent increase in sales volume. By how much would each companys profits increase?