Maurice Tutor

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    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 18 Aug 2017 My Price 9.00

candied yams

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

  

Auto-Yams
Sales   $400,000   $400,000
Variable costs   320,000   160,000
Contribution margin   80,000   240,000
Fixed costs   30,000   190,000
Net income   $50,000   $50,000


The investment banker is interested in acquiring one of these companies. However, she is concerned about the impact that each companyAc€?cs cost structure might have on its profitability.
 

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Correct answer. Your answer is correct.
   
Calculate each companyAc€?cs degree of operating leverage. (Round answers to 2 decimal places, e.g. 1.15.)
   

Degree of Operating Leverage
Traditional Yams  

Entry field with correct answer
Auto-Yams  

Entry field with correct answer
 

SHOW SOLUTION

SHOW ANSWER

LINK TO TEXT
Partially correct answer. Your answer is partially correct. Try again.
   
Determine the effect on each companyAc€?cs net income if sales decrease by 15% and if sales increase by 10%. Do not prepare income statements. (Round answers to 2 decimal place, 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 15%      
   Traditional Yams  

Entry field with correct answer

 %
   Auto-Yams  

Entry field with correct answer

 %
       
Sales increase by 10%      
   Traditional Yams  

Entry field with incorrect answer

 %
   Auto-Yams  

Entry field with incorrect answer

 %

 

Answers

Maurice Tutor
(5)
Status NEW Posted 18 Aug 2017 04:08 PM My Price 9.00

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