An investment banker is analyzing two companies that specialize in the production and sale of gourmet cappuccino and chai mixes. Roasted Beans Co.

An investment banker is analyzing two companies that specialize in the production and sale of gourmet cappuccino and chai mixes. Roasted Beans Co. uses a labor-intensive approach and Monat Industries uses a mechanized system. Variable costing income statements for the two companies are shown below: Roasted Beans Monat Industries Sales $ 1,000,000 $ 1,000,000 Variable costs 650,000 300,000 Contribution margin 350,000 700,000 Fixed costs 175,000 525,000 Net income $ 175,000 $ 175,000 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 protability. Calculate each company's degree of operating leverage. Degree of Operating Leverage Roasted Beans Monat Industries Determine the effect on each company's net income. Do not prepare income statements. If sales decrease by 10%. Roasted Beans %