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An investment banker is analyzing two companies that specialize in the production and sale of canned fruits. CVP income statements for the two companies are
An investment banker is analyzing two companies that specialize in the production and sale of canned fruits. CVP income statements for the two companies are below. shown Frujo Fruity Sales Variable costs Contribution ,000 $400,000 280,000 140,000 $120,000 20,000 margin 260,000 160,000 Fixed costs Net operating income $100,000$100,000 The investment banker is interested in acquiring one of these companies. However, she is concerned about the impact that each company's cost structure to variable expenses) might have on its profitability. (ratio of fixed Instructions (a) Calculate each company's degree of opera ecrease by 10% 2 Marks) company's net income if sales d (b) Determine the effect on each (c) Determine the effect on each company's net income if sales increase by 5 (d) Why is the change in sales affecting the two companies' net operating 12 Marks 2 Marks) differently? [Insert question 4 answer here
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