TastyKreme and Krispy Kake are both producers of baked goods, but each has followed a different production strategy. The differences in their strategies resulted in differences in their cost structure, as shown in the following table: Estimated sales in units Unit price Variable cost per unit Total fixed costs. TastyKreme Krispy Kake 20,000 1. Operating income 6.00 3.00 $ 30,000 Required: 1. Compute the operating income and degree of operating leverage (DOL) for each company. (Round "Degree of operating I to 1 decimal place.) Degree of operating leverage 15,000 8.00 3.00 $ 45,000 2. Assuming sales volume for each company will decline by 10% and that their cost structures will not change, compute the p and dollar amount of the change in operating income for each company. (Negative values should be indicated by a minus s TastyKreme Krispy Kake
TastyKreme and Krispy Kake are both producers of baked goods, but each has followed a different production strategy. The differences in their strategies resulted in differences in their cost structure, as shown in the following table: Estimated sales in units Unit price Variable cost per unit Total fixed costs. TastyKreme Krispy Kake 20,000 1. Operating income 6.00 3.00 $ 30,000 Required: 1. Compute the operating income and degree of operating leverage (DOL) for each company. (Round "Degree of operating I to 1 decimal place.) Degree of operating leverage 15,000 8.00 3.00 $ 45,000 2. Assuming sales volume for each company will decline by 10% and that their cost structures will not change, compute the p and dollar amount of the change in operating income for each company. (Negative values should be indicated by a minus s TastyKreme Krispy Kake
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:TastyKreme and Krispy Kake are both producers of baked goods, but each has followed a different production strategy. The
differences in their strategies resulted in differences in their cost structure, as shown in the following table:
Estimated sales in units
Unit price
Variable cost per unit
Total fixed costs
TastyKreme Krispy Kake
20,000
6.00
3.00
$ 30,000
Required:
1. Compute the operating income and degree of operating leverage (DOL) for each company. (Round "Degree of operating leverage"
to 1 decimal place.)
1. Operating income
15,000
8.00
3.00
$ 45,000
2. Assuming sales volume for each company will decline by 10% and that their cost structures will not change, compute the percentage
and dollar amount of the change in operating income for each company. (Negative values should be indicated by a minus sign.)
Degree of operating leverage
2. Percentage change in operating income
Dollar change in operating income
TastyKreme
%
Krispy Kake
%
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