Required:
Question 1: Explain how changes in activity affect the contribution margin and the net profit. Be sure to discuss both sales activity changes and production activity changes. Use the Contribution Income statement format as a framework for your discussion.
Question 2: In all respects Company A and Company B are identical except that Company A's costs are mostly variable, whereas Company B's costs are mostly fixed. When sales increase, which company will tend to make the greatest profits? Explain.
Note: Please show the work not just the answer.