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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. Traditional Yams Auto-Yams Sales $391,000 $391,000 Variable costs 329,000 158,000 Contribution margin 62,000 233,000 Fixed costs 12,000 183,000 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 company's cost structure might have on its prontability 16 ca 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 2 decimal places, eg. 1.15) Degree of Operating Leverage Traditional Yams Auto Yams 466 Textbook and Media Determine the effect on each company's net income if sales decrease by 10% and if sales increase by 5% Do not prepare income statements. (Round answers to 2 decimal places, eg. 10.52. If % change is negative, enter amount with either a negative sign or parenthesis, 08.-10.520r (10.52)) % Change in Net Income Sales decrease by 10% Traditional Yams 12.60 % Auto-Yams 1 46.60 Sales increase.by.5% Traditional aims % Auto Yam

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