Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Greenback Store's cost structure is dominated by variable costs with a contribution margin ratio of 0.25 and fixed costs of $40,000. Every dollar of

image text in transcribed

The Greenback Store's cost structure is dominated by variable costs with a contribution margin ratio of 0.25 and fixed costs of $40,000. Every dollar of sales contributes 25 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 0.75 and fixed costs of $440,000. Every dollar of sales contributes 75 cents toward fixed costs and profit. Both companies have sales of $800,000 for the month Required: a. Compare the two companies' cost structures. GREENBACK STORE ONE-MART Amount Percentage Amount Percentage 100%) $ 75 25 % $800,000 Sales Variable cost Contribution margin Fixed costs Operating profit 800,000 100 40,000 40,00 b. Suppose that both companies experience a 15 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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Introductory Accounting Finance And Auditing For Lawyers

Authors: Lawrence Cunningham

6th Edition

0314280456, 978-0314280459

More Books

Students also viewed these Accounting questions

Question

Explain the steps involved in training programmes.

Answered: 1 week ago

Question

What are the need and importance of training ?

Answered: 1 week ago

Question

Do you agree that unions stifle creativity? Why or why not?

Answered: 1 week ago

Question

6 What is the selection phase?

Answered: 1 week ago