The Greenback Stores cost structure is dominated by variable costs with a contribution margin ratio of 0.40 and fixed costs of $95,400. Every dollar of sales contributes 40 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 $307,400. Every dollar of sales contributes 80 cents toward fixed costs and profit. Both companies have sales of $530,000 for the month.

Required:

a. Compare the two companies cost structures.

b. Suppose that both companies experience a 10 percent increase in sales volume. By how much would each companys profits increase?