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Exercise 20-16 (Part Level Submission) An investment banker is analyzing two companies that specialize in the production and sale of candied yams. Traditional Yams uses
Exercise 20-16 (Part Level Submission) 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 Traditional Sales Variable costs Contribution margin Fixed costs Net income Yams Auto-Yams 392,000 392,000 157.000 235,000 192,000 $ 43,000 319,000 73,000 30,000 $ 43,000 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 profitability (a1) Calculate each company's degree of operating leverage. (Round answers to 2 decimal places, e.g. 1.15.) Degree of Operating Leverage Traditional Yams Auto-Yams
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