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An investment banker is analyzing two companies that specialize in the production and sale of candied yams. Traditional Yams uses a labor-intensive approach, and
An investment banker is analyzing two companies that specialize in the production and sale of candied yams. Traditional Yams uses a labor-intensive approach, and Auto-Yams uses a mechanized system, CVP income statements for the two companies are shown below. Traditional Yams Auto-Yams Sales $391,000 $391,000 Variable costs 329,000. 158,000 Contribution margin 62,000 233,000 Fixed costs 12,000 183,000 Net income $50,000 $50,000 The investment banker is interested in acquiring one of these companies. However, she is concerned about the impact that each company's cost structure might have on its profitability.
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