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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
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
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