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 $ 1,242,000 832,140 409,860 74,520 335,340 $ Dennis's Retail Mart's Amount $ Percentage 100 % 67 % 33 % % % Oakfield Convenience Store Amount $1,242,000 $ 409,860 832,140 596,160 Percentage 100 % 33 % 67 % % %
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 $ 1,242,000 832,140 409,860 74,520 335,340 $ Dennis's Retail Mart's Amount $ Percentage 100 % 67 % 33 % % % Oakfield Convenience Store Amount $1,242,000 $ 409,860 832,140 596,160 Percentage 100 % 33 % 67 % % %
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
A-7
![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
$ 1,242,000
832,140
409,860
$
$
74,520
335,340
Percentage
100 %
67 %
33 %
%
%
Oakfield Convenience Store
Amount
$ 1,242,000
409,860
832,140
596,160
$
Percentage
100 %
33 %
67 %
%
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fabdd5434-7351-4eb0-b1bd-693a0d7431e6%2Ffc13d12c-cdf3-459e-a003-1d685bc863c8%2F44kukid_processed.png&w=3840&q=75)
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.
Dennis's Retail Mart's
Amount
Sales
Variable cost
Contribution margin
Fixed costs
Operating profit
$ 1,242,000
832,140
409,860
$
$
74,520
335,340
Percentage
100 %
67 %
33 %
%
%
Oakfield Convenience Store
Amount
$ 1,242,000
409,860
832,140
596,160
$
Percentage
100 %
33 %
67 %
%
%
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