Homework Answers
(A) Statement of comparison of cost structure of two companies
| Particulars | Greenback Store | One Mart | ||||
| Amounts | Percentage | Amounts | Percentage | |||
| Sales | $ 460,000 | 100 | % | $ 460,000 | 100 | % |
| Variable costs | $ 322,000 | 70 | % | $ 92,000 | 20 | % |
| Contribution margin | $ 138,000 | 30 | % | $ 368,000 | 80 | % |
| Fixed costs | $ 55,200 | 12 | % | $ 285,200 | 62 | % |
| Operating profit | $ 82,800 | 18 | % | $ 82,800 | 18 | % |
(B) When both the companies experience a 15% increment in sales, following will be the results in profits:
| Particulars | Greenback Store | One Mart | ||||
| Amounts | Percentage | Amounts | Percentage | |||
| Sales: $460,000 (previous year sales) X 115% | $ 529,000 | 100 | % | $ 529,000 | 100 | % |
| Variable costs ( previous year V.C X 115%) | $ 370,300 | 70 | % | $ 105,800 | 20 | % |
| Contribution margin | $ 158,700 | 30 | % | $ 423,200 | 80 | % |
| Fixed costs | $ 55,200 | 10.43 | % | $ 285,200 | 53.91 | % |
| Operating profit | $ 103,500 | 19.57 | % | $ 138,000 | 26.09 | % |
Final Analysis
| Company Name | Amounts of profit increased by | Percentage of profit on sales increased by |
| Greenback Store | $ 103,500 - $82,800 = $ 20,700 | = 19.57% - 18% =1.57% |
| One Mart | $ 138,000 - $ 82,800 = $ 55,200 | = 26.09% - 18% = 8.09% |
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