Exercise 146 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: Monat Industries Sales Variable costs Contribution margin Fixed costs Roasted Beans $ 1,000,000 650,000 350,000 175,000 175,000 $ 1,000,000 300,000 700,000 525,000 175,000 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. 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%. Change in Net Income Roasted Beans % Monat 9 If sales increase by 15%. Change in Net Income Roasted Beans Monat