The Greenback Stores cost structure is dominated by variable costs with a contribution margin ratio of 0.40 and fixed costs of $88,500. Every dollar of sales contributes 40 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 $265,500. Every dollar of sales contributes 70 cents toward fixed costs and profit. Both companies have sales of $590,000 for the 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 companys profits increase?