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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 S50,000. 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 S50,000. 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 0.80 and fixed costs of S300,000. Every dollar of sales contributes 80 cents toward fixed costs and profit. Both companies have sales of $500,000 for the month Required: a. Compare the two companies' cost structures GREENBACK STORE ONE-MART Percentage Amount Percentage Sales Variable cost Contribution margin Fixed costs Operating profit S 500,000 100 % S 500,000 100 % 50,000 300,000 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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