An investment banker is analyzing two companies that specialize in the production and sale of...
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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. Sales Variable costs Contribution margin Fixed costs Net income Traditional Yams $409,000 330,000 79,000 29,000 $50,000 Auto-Yams $409,000 160,000 249,000 199,000 $50,000 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.
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. The investment banker is interested in acquiring one of these companies. Howiver, she is concerned about the impact that each companys 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.)
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