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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 Auto-Yams
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. Sales Variable costs Contribution margin Fixed costs Traditional Yams $390,000 310,000 8 0,000 30,000 $50,000 Auto-Yams $390,000 155,000 235,000 185,000 $50,000 Net income 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. (a 1) Your answer is correct. Calculate each company's degree of operating leverage. (Round answers to 2 decimal places, eg. 1.15.) Degree of Operating Leverage SAO (a1) Your answer is correct. Calculate each company's degree of operating leverage. (Round answers to 2 decimal places, eg. 1.15.) Degree of Operating Leverage Traditional Yams 1.60 Auto-Yams 4.70 e Textbook and Media Attempts: 1 of 2 used Determine the effect on each company's net income if sales decrease by 10% and if sales increase by 5%. Do not prepare income statements. (Round answers to 2 decimal places, e.g. 10.52.7 % change is negative, enter amount with either a negative sign or parenthesis, e.g.-10.52 or (10.52).) Attempts: 1 of 2 used (6) Determine the effect on each company's net income if sales decrease by 10% and if sales increase by 5%. Do not prepare income statements. (Round answers to 2 decimal places, e.g. 10.52. If % change is negative, enter amount with either a negative sign or parenthesis, e.g.-10.52 or (10.52).) % Change in Net Income Sales decrease by 10% Traditional Yams Auto-Yams Sales increase by 5% Traditional Yams Auto-Yams e Textbook and Media Submit Answer Attempts: 0 of 2 used Save for later
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