Foxx company cost structure is dominated by variable costs with a contribution margin ratio of 0.25 and fixed cost of $100,000. every dollar of sales contributes 25 cents toward fixed costs and profit. The cost structure of competitor. Bey once, Inc, is dominated by fixed costs with a higher contribution margin ratio of 0.80 and fixed costs of $400,000. Evey dollar of sales contributes 80 cents toward fixed costs and profit. Both companies have sales of $600,000 per month.
Required
a. Compare the two companies cost structure.
b. Suppose that both companies experience a 20 percent increase in sales volume By how much would each company's profits increase?