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The Greenback Store's cost structure is dominated by variable costs with a contribution margin ratio of 0.30 and fixed costs of $38,500. Every dollar of
The Greenback Store's cost structure is dominated by variable costs with a contribution margin ratio of 0.30 and fixed costs of $38,500. Every dollar of sales contributes 30 cents toward fixed costs and profit. The cost structure of a competitor, One-Mart, Is dominated by fixed costs with a higher contribution margin ratio of 0.70 and fixed costs of $258,500. Every dollar of sales contributes 70 cents toward fixed costs and profit. Both companies have sales of $550,000 for the 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. GREENBACK STORE ONE-MART Amount Percentage Amount Percentage Sales % 9% Variable cost Contribution margin 9% Fixed costs Operating profit 9%Required A Required B Suppose that both companies experience a 20 percent increase in sales volume. By how much would each company's profits increase? Greenback Store's profits increase by One-Mart's profits increase by
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