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Couzen's Company's cost structure is dominated by variable costs with a contribution margin ratio of 0.28 and fixed costs of $490,500. 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 $2,534,250. Every dollar of sales contributes 78 cents toward fixed costs and profit. Both companies have sales of $ 4,087,500 annually. Required: a. Compare the two companies' cost structures. 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?

Couzen's Company's cost structure is dominated by variable costs with a contribution margin ratio of 0.28 and fixed costs of $490,500. 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 $2,534,250. Every dollar of sales contributes 78 cents toward fixed costs and profit. Both companies have sales of $ 4,087,500 annually. Required: a. Compare the two companies' cost structures. 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?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Couzen's Company's cost structure is dominated by variable costs with a contribution margin ratio of 0.28 and fixed costs of $490,500. 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 $2,534,250. Every dollar of sales contributes 78 cents toward fixed costs and profit. Both companies have sales of $ 4,087,500 annually. Required: a. Compare the two companies' cost structures.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?
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 $490,500. 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 $2,534,250. Every dollar of sales contributes 78 cents toward fixed costs and profit. Both companies have sales of $ 4,087,500 annually. Required: a. Compare the two companies' cost structures.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?
Required A Required B Compare the two companies' cost structures. Couzen's Company Sales Variable cost Contribution margin Fixed costs Operating profit Amount Percentage % % % % % Jones & Family Amount Percentage % % % % %
Transcribed Image Text:Required A Required B Compare the two companies' cost structures. Couzen's Company Sales Variable cost Contribution margin Fixed costs Operating profit Amount Percentage % % % % % Jones & Family Amount Percentage % % % % %
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