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The Greenback Store's cost structure is dominated by variable costs with a contribution margin ratio of 0.45 and fixed costs of $113,400. Every dollar of
The Greenback Store's cost structure is dominated by variable costs with a contribution margin ratio of 0.45 and fixed costs of $113,400. Every dollar of sales contributes 45 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 $270,900. Every dollar of sales contributes 70 cents toward fixed costs and profit. Both companies have sales of $630,000 for the month Required a. Compare the two companies' cost structures GREENBACK STORE ONE-MART Amount PercentageAmo unt Percentage Sales Variable cost Contribution margin Fixed costs Operating profit 630,000 100196 $ 630,000 1001% 346,500 283,500|| 45%) $ 441,000 113,400 189,000 30 701 % 43 18 270,900 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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