Exercise 6-16 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 Yams Sales Variable costs Contribution margin Fixed costs Net income $391,000 323,000 68,000 28,000 $40,000 Auto-Yams $391,000 156,000 235,000 195,000 $40,000 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. 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 LINK TO TEXT VIDEO: SIMILAR EXERCISE Determine the effect on each company's net income if sales decrease by 20% and if sales increase by 7%. 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 20% Traditional Yams Auto-Yams Sales increase by 7% Traditional Yams Auto-Yams LINK TO TEXT VIDEO: SIMILAR EXERCISE