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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: TastyKreme 21,000 7 4 $ 31,500 Krispy Kake 16,000 9 Estimated sales in units Unit price Variable cost per unit Total fixed costs Required: 4 $ 48,000 1. Compute the operating income and degree of operating leverage for each company. (Round "Degree of operating leverage" to 1 decimal place.) 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.)

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: TastyKreme 21,000 7 4 $ 31,500 Krispy Kake 16,000 9 Estimated sales in units Unit price Variable cost per unit Total fixed costs Required: 4 $ 48,000 1. Compute the operating income and degree of operating leverage for each company. (Round "Degree of operating leverage" to 1 decimal place.) 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.)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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: TastyKreme 21,000 7 4 $ 31,500 Krispy Kake 16,000 9 Estimated sales in units Unit price Variable cost per unit Total fixed costs Required: 4 $ 48,000 1. Compute the operating income and degree of operating leverage for each company. (Round "Degree of operating leverage" to 1 decimal place.) 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.) 1. Operating income Degree of operating leverage 2. Percentage change in operating income Dollar change in operating income TastyKreme Krispy Kake % %
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: TastyKreme 21,000 7 4 $ 31,500 Krispy Kake 16,000 9 Estimated sales in units Unit price Variable cost per unit Total fixed costs Required: 4 $ 48,000 1. Compute the operating income and degree of operating leverage for each company. (Round "Degree of operating leverage" to 1 decimal place.) 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.) 1. Operating income Degree of operating leverage 2. Percentage change in operating income Dollar change in operating income TastyKreme Krispy Kake % %
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