The Greenback Stores cost structure is dominated by variable costs with a contribution margin ratio of 0.45 and fixed costs of $90,000. 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 $277,500. Every dollar of sales contributes 70 cents toward fixed costs and profit. Both companies have sales of $750,000 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 companys profits increase?