Question

Kroger's CEO is amazed by his current cost He tells his shareholders, "Compared to other industries...

Kroger's CEO is amazed by his current cost He tells his shareholders, "Compared to other industries our variable costs are much higher relative to fixed costs." Kroger's cost structure (probably) results in a relatively:

Low contribution margin ratio and low degree of operating leverage.

Insufferable CEO
High contribution margin ratio and low degree of operating leverage.
High contribution margin ratio and high degree of operating leverage.
Low contribution margin ratio and high degree of operating leverage.
Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Answer is

Low contribution margin ratio and low degree of operating leverage.

Increase in variable cost will decrease the contributio nmargin ratio as variable cost is the key to calculate the contribution margin ratio, as soon as it increase , contributio nmargin ratio will decrease.

Also, decrease in fixed cost or lower fixed cost will decrease the operating leverage as it contains to variables i.e. Contribution and EBIT. if there is minor difference between these two, operating leverage will be low.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Calculator High-Low Method The manufacturing costs of Alex Industries for three months of the year are...
Calculator High-Low Method The manufacturing costs of Alex Industries for three months of the year are provided below. Total Costs Production January $428,040 2,255 units February 665,840 6,355 March 568,820 4,220 Using the high-low method, determine (a) the variable cost per unit and (b) the total fixed cost. Round all answers to the nearest whole dollar. a. Variable cost per unit $ b. Total fixed cost $ Contribution Margin Sally Company sells 22,000 units at $18 per unit. Variable costs...
Vineyard industries has the following revenue and cost structure: Sales $25000 Variable costs 20,000 Contribution Margin...
Vineyard industries has the following revenue and cost structure: Sales $25000 Variable costs 20,000 Contribution Margin 5,000 Fixed Costs 5400 Operating Income (400) If Vineyard industries can increase the volume of sales by 25%, operating income will be:
Jerry is a financial analyst at ABC Industries. These are his projections for the upcoming year:...
Jerry is a financial analyst at ABC Industries. These are his projections for the upcoming year: Unit sales volume 1,096,000 Sale price per unit $103 Variable cost per unit $63 Fixed operating costs $17,717,000 Fixed financing expenses $4,687,000 Given this information, what is the projected degree of operating leverage (DOL) for ABC? (show your answer to two decimal places, e.g., 12.34)
Spring Company’s cost structure is dominated by variable costs with a contribution margin ratio of 0.25...
Spring Company’s cost structure is dominated by variable costs with a contribution margin ratio of 0.25 and fixed costs of $57,200. Every dollar of sales contributes 25 cents toward fixed costs and profit. The cost structure of a competitor, Winters Company, is dominated by fixed costs with a higher contribution margin ratio of 0.70 and fixed costs of $255,200. Every dollar of sales contributes 70 cents toward fixed costs and profit. Both companies have sales of $440,000 per month. a....
7. The costs of carrying inventory include all of the following except: a)Ordering costs. b)Cost of...
7. The costs of carrying inventory include all of the following except: a)Ordering costs. b)Cost of warehouse space. c)Insurance and handling costs. d)Interest on funds tied up in inventory. e)None of the above. 8. Once the break-even point is reached: a)The contribution margin ratio begins to decrease. b)The variable expenses will remain constant in total. c)The total contribution margin changes from negative to positive. d)The net operating income will increase by the unit contribution margin for each additional item sold....
1.Waterway Industries has two divisions—Standard and Premium. Each division has hundreds of different types of tennis...
1.Waterway Industries has two divisions—Standard and Premium. Each division has hundreds of different types of tennis racquets and tennis products. The following information is available: Standard division Premium division Total Sales $400000 $600000 $1000000 Variable costs 300000 380000 Contribution margin $100000 $220000 Total fixed costs $300000 What is the weighted-average contribution margin ratio? 2.Oriole Company’s high and low level of activity last year was 53000 units of product produced in May and 30000 units produced in November. Machine maintenance costs...
Which of the following statements is CORRECT? a. In general, it's better to have a low...
Which of the following statements is CORRECT? a. In general, it's better to have a low inventory turnover ratio than a high one, as a low one indicates that the firm has an adequate stock of inventory relative to sales and thus will not lose sales as a result of running out of stock. b. The more conservative a firm's management is, the higher the firm's total debt to total capital ratio is likely to be. c. A decline in...
1. Supply costs at Coulthard Corporation's chain of gyms are listed below: Client-Visits Supply Cost March...
1. Supply costs at Coulthard Corporation's chain of gyms are listed below: Client-Visits Supply Cost March 11,667 $ 28,349 April 11,463 $ 28,298 May 11,995 $ 28,431 June 14,000 $ 28,932 July 11,727 $ 28,364 August 11,213 $ 28,235 September 12,007 $ 28,434 October 11,698 $ 28,357 November 11,846 $ 28,394 Management believes that supply cost is a mixed cost that depends on client-visits. Use the high-low method to estimate the variable and fixed components of this cost. Compute the...
The Greenback Store’s cost structure is dominated by variable costs with a contribution margin ratio of...
The Greenback Store’s cost structure is dominated by variable costs with a contribution margin ratio of 0.45 and fixed costs of $103,500. Every dollar of sales contributes 45 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 0.80 and fixed costs of $345,000. Every dollar of sales contributes 80 cents toward fixed costs and profit. Both companies have sales of $690,000 for the month....
Casas Modernas of Juarez, Mexico, is contemplating a major change in its cost structure. Currently, all...
Casas Modernas of Juarez, Mexico, is contemplating a major change in its cost structure. Currently, all of its drafting work is performed by skilled draftsmen. Rafael Jiminez, Casas’ owner, is considering replacing the draftsmen with a computerized drafting system. However, before making the change, Rafael would like to know the consequences of the change, since the volume of business varies significantly from year to year. Shown below are CVP income statements for each alternative. Manual System Computerized System Sales $1,740,000...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT