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An investment banker is analyzing two companies that specialize in the production and sale of candied apples. Old-Fashion Apples uses a labor-intensive approach, and Mech-Apple
An investment banker is analyzing two companies that specialize in the production and sale of candied apples. Old-Fashion Apples uses a labor-intensive approach, and Mech-Apple uses a mechanized system. CVP income statements for the two companies are shown below. Old Fashion Apples Mech-Apple Sales $401,300 $401,300 Variable costs 333,942 133,794 Contribution margin 67,358 267,506 Fixed costs 3,208 203,356 Net income $64,150 $64,150 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. Calculate each company's degree of operating leverage for Mech-Apple (Round answers to 2 decimal places, e.g. 10.50.)
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