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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. b. Suppose that both companies experience a 15 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. Sales Variable cost Contribution margin Fixed costs Operating profit GREENBACK STORE ONE-MART Amount Percentage Amount Percentage $ 800,000 100% $ 800,000 100% 600,000 75 200,000 25 $ 200,000 25% $ 600,000 75% 40,000 5 440,000 55 $ 160,000 20% $ 160,000 20% (Required A Required 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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