The cost structure of Dennis's Retail Mart is dominated by variable costs with a contribution margin ratio of 0.33 and fixed costs of $74,520. Every dollar of sales contributes 33 cents toward fixed costs and profit. The cost structure of a competitor, Oakfield Convenience Store, is dominated by fixed costs with a higher contribution margin ratio of 0.67 and fixed costs of $596,160. Every dollar of sales contributes 67 cents toward fixed costs and profit. Both companies have sales of $1,242,000 for the year. 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 company's profits increase? Complete this question by entering your answers in the tabs below. Required A Required B Compare the two companies' cost structures. Dennis's Retail Mart's Amount Sales Variable cost Contribution margin Fixed costs Operating profit Percentage % % % % % Required A Oakfield Convenience Store Amount Percentage Required B > % % % % %
The cost structure of Dennis's Retail Mart is dominated by variable costs with a contribution margin ratio of 0.33 and fixed costs of $74,520. Every dollar of sales contributes 33 cents toward fixed costs and profit. The cost structure of a competitor, Oakfield Convenience Store, is dominated by fixed costs with a higher contribution margin ratio of 0.67 and fixed costs of $596,160. Every dollar of sales contributes 67 cents toward fixed costs and profit. Both companies have sales of $1,242,000 for the year. 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 company's profits increase? Complete this question by entering your answers in the tabs below. Required A Required B Compare the two companies' cost structures. Dennis's Retail Mart's Amount Sales Variable cost Contribution margin Fixed costs Operating profit Percentage % % % % % Required A Oakfield Convenience Store Amount Percentage Required B > % % % % %
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Required A Required B
Suppose that both companies experience a 10 percent increase in sales volume. By how much would each company's profits
increase?
Dennis's Retail Mart's profits increase by
Oakfield Convenience Store's profits increase by
< Required A
Required
Transcribed Image Text:The cost structure of Dennis's Retail Mart is dominated by variable costs with a contribution margin ratio of 0.33 and fixed costs of
$74,520. Every dollar of sales contributes 33 cents toward fixed costs and profit. The cost structure of a competitor, Oakfield
Convenience Store, is dominated by fixed costs with a higher contribution margin ratio of 0.67 and fixed costs of $596,160. Every
dollar of sales contributes 67 cents toward fixed costs and profit. Both companies have sales of $1,242,000 for the year.
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 company's profits
increase?
Complete this question by entering your answers in the tabs below.
Required A Required B
Compare the two companies' cost structures.
Sales
Variable cost
Contribution margin
Fixed costs
Operating profit
Dennis's Retail Mart's
Amount
Percentage
%
%
%
%
%
Oakfield Convenience Store
Amount
Percentage
%
%
%
%
%
Required B >
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