Homework Answers
| a. | Greenback store | One mart | |||||
| Amount | Percentage | Amount | Percentage | ||||
| Sales | 670000 | 100.0% | 670000 | 100.0% | |||
| Less: Variable Cost | 368500 | 55.0% | 201000 | 30.0% | |||
| Contribution Margin | 301500 | 45.0% | 469000 | 70.0% | |||
| Less: fixed cost | 107200 | 16.0% | 274700 | 41.0% | |||
| Operating income | 194300 | 29.0% | 194300 | 29.0% | |||
| Green back store | |||||||
| Variable cost on Sale= Sale -Contribution margin | |||||||
| Variable cost on sale= 100%-45%=55% | |||||||
| Variable cost = 55% X 670000=368500 | |||||||
| One mart | |||||||
| Variable cost on sale= 100% - 70%=30% | |||||||
| Variable cost = 30% X 670000=201000 | |||||||
| Note: fixed cost and income Contribution already given in question Greenback 45% and One mart 70% on sale | |||||||
| b. 20% increase in Sale, profit is | |||||||
| if sales increase 20% and contribution margin also increase 20% here and fixed cost will not change. | |||||||
| and profit also increase 20% of contribution margin. | |||||||
| Greenback store | One mart | ||||||
| Contribution margin | 301500 | 469000 | |||||
| increase in sale | 20% | 20% | |||||
| increase in operating income (Contribution margin X 20%) | 60300 | 93800 | |||||
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$100,800. Every dollar of sales contributes 40 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 $244,800. Every dollar of sales contributes
70 cents toward fixed costs and profit. Both companies have sales
of $480,000 for the month....
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