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Exercise 9-32 Degree of Operating Leverage (DOL LO 9-5) TastyKreme and Krispy Kake are both producers of baked goods, but each has followed a different
Exercise 9-32 Degree of Operating Leverage (DOL LO 9-5) TastyKreme and Krispy Kake are both producers of baked goods, but each has followed a different production strategy. The differences in their strategies resulted in differences In their cost structure, as shown in the following table: TastyKreme Krispy Kake Estimated sales in units Unit price Variable cost per unit Total fixed costs 21,000 34,000 4 31,50$102,000 Required: 1. Compute the operating income and degree of operating leverage (DOL) for each company. (Round "Degree of operating leverage" to 1 declmal place.) 2. Assuming sales volume for each company will decline by 10% and that ter cost structures will not change, compute the percentage and dollar amount of the change in operating income for each company. (Negative values should be Indicated by a mlnus sign.) TastyKreme Krispy Kake 1. Operaing income Degree of operating leverage 2. Percentage change in operating income Dollar change in operating income
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