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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

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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 echanized system. CVP income statements for the two companies are shown below. Sales Jariable costs Contribution margin Fixed costs Net Income Traditional Yams $ 410,000 318,000 92,000 32.000 $ 60,000 Auto-Yams $410,000 162,000 248,000 138.000 $60,000 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 (1) Your answer is correct Calculate each company's degree of operating leverage (Round answers to decimal places, .0. 1.15. Degree of Operating Leverage Traditional Yams Auto-rams Determine the effect on each company's net income if sales decrease by 20% and if sales increase by 9%. 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, ..-10.52 or 10.52).) Change in Net Income Sales decrease by 2014 Traditional Yams Auto-Yams Sales increase try 99% Traditional Yams Auto Yans

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