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Tasty Kreme and Krispy Kake are both producers of baked goods, but each has followed a different production strategy. The differences in their strategies resulted
Tasty Kreme 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: Estimated sales in units Unit price Variable cost per unit Total fixed costs Tastykreme 27,000 5 2 $ 40,500 Krispy Kake 22,000 9 4 $ 66,000 Required: 1. Compute the operating income and degree of operating leverage (DOL) for each company. (Round "Degree of operating leverage" to 1 decimal place.) 2. Assuming sales volume for each company will decline by 10% and that their 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 minus sign.) Answer is complete but not entirely correct. 1 $ S Operating income Degree of operating leverage Percentage change in operating income Dollar change in operating income Tasty Kreme 40,500 2.0 20 X % 32,400 X Krispy Kake 44,000 2.5 25 % 33.000 X 2 $ $
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