An investment banker is analyzing two companies that specialize in the production and sale of candied yams. Cullumber Yams uses a labor-intensive approach, and Ivanhoe Yams uses a mechanized system. CVP income statements for the two companies are shown below. Sales Variable costs Contribution margin Fixed costs Net income (a1) MODNI Cullumber Yams Cullumber Ivanhoe Yams Yams $405,000 323,000 82,000 32,000 $50,000 Ivanhoe Yams $405.000 160.000 245.000 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. 195,000 $50,000 Calculate each company's degree of operating leverage. (Round answers to 2 decimal places, e.g. 1.15.) Degree of Operating Leverage
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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