Compare the two companies cost structures

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The Greenback Store's cost structure is dominated by variable costs with a contribution margin ratio of 0.20 and fixed costs of $20.000. Every dollar of sales contributes 20 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 $220 000. Every dollar of sales contributes 70 cents toward fixed costs and profit. Both companies have sales of $400.000 for the month.

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Question a. Compare the two companies' cost structures.

Question b. Suppose that both companies experience a 15 percent increase in sales volume. By how much would each company's profits Increase?

Reference no: EM132465489

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