Couzen's Company's cost structure is dominated by variable costs with a contribution margin ratio of 0.28 and fixed costs of $517,500. Every dollar of sales contributes 28 cents toward fixed costs and profit. The cost structure of a competitor, Jones & Family, is dominated by fixed costs with a higher contribution margin ratio of 0.78 and fixed costs of $2,673,750. Every dollar of sales contributes 78 cents toward fixed costs and profit. Both companies have sales of $4,312,500 annually. Required: a. Compare the two companies' cost structures. b. Suppose that both companies experience a 12 percent decrease in sales volume. By how much would each company's profits decrease? Complete this question by entering your answers in the tabs below. Required A Required B Compare the two companies' cost structures. Couzen's Company Sales Variable cost Contribution margin Fixed costs Operating profit Amount Percentage % % % % % < Required A Jones & Family Amount Percentage Required B > % % % % %

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
Couzen's Company's cost structure is dominated by variable costs with a contribution margin ratio of 0.28 and fixed costs of $517,500.
Every dollar of sales contributes 28 cents toward fixed costs and profit. The cost structure of a competitor, Jones & Family, is
dominated by fixed costs with a higher contribution margin ratio of 0.78 and fixed costs of $2,673,750. Every dollar of sales contributes
78 cents toward fixed costs and profit. Both companies have sales of $4,312,500 annually.
Required:
a. Compare the two companies' cost structures.
b. Suppose that both companies experience a 12 percent decrease in sales volume. By how much would each company's profits
decrease?
Complete this question by entering your answers in the tabs below.
Required A Required B
Compare the two companies' cost structures.
Couzen's Company
Sales
Variable cost
Contribution margin
Fixed costs
Operating profit
Amount
Percentage
%
%
%
%
%
< Required A
Jones & Family
Amount
Percentage
Required B >
%
%
%
%
%
Transcribed Image Text:Couzen's Company's cost structure is dominated by variable costs with a contribution margin ratio of 0.28 and fixed costs of $517,500. Every dollar of sales contributes 28 cents toward fixed costs and profit. The cost structure of a competitor, Jones & Family, is dominated by fixed costs with a higher contribution margin ratio of 0.78 and fixed costs of $2,673,750. Every dollar of sales contributes 78 cents toward fixed costs and profit. Both companies have sales of $4,312,500 annually. Required: a. Compare the two companies' cost structures. b. Suppose that both companies experience a 12 percent decrease in sales volume. By how much would each company's profits decrease? Complete this question by entering your answers in the tabs below. Required A Required B Compare the two companies' cost structures. Couzen's Company Sales Variable cost Contribution margin Fixed costs Operating profit Amount Percentage % % % % % < Required A Jones & Family Amount Percentage Required B > % % % % %
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education