By how much would each company profit increase

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Question - The Greenback Store's cost structure is dominated by variable costs with a contribution margin ratio of 0.25and 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 0.75and 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 profit increase?

Reference no: EM133100798

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