An investment banker is analyzing tow companies that

Reference no: EM13602782

An investment banker is analyzing tow companies that specialize in production and sales of candied apples. Old Fashio Apples uses a labor intensive approach and Mech Apples uses a mechanized system. CVP income statements for the two companies are shown:

old fashion apples mech apples

sales 398000 398000
contribution margin 76084 254794
variable cost 321916 143206
fixed cost 17104 195814
net income 58980 58980

the investment banker is interested in aquiring one of these companies However she concerned with the impact of that each compnay's cost structure might have its own profitability.

calculate the degreee of each companys degree of leverage.

old fashioned apples
mech apples

determine whihc companys cost structure makes it more senstive to changes in sales volumes

determine teh effect on each companys net income if sales decrease by 15% and if sales increase by 5.6% do not do income statements.

sales increase by 15%
old fashioned apples
mech apples

sales increase by 5.6%
old fashioned apples
mech apples

Reference no: EM13602782

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