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 |
|
$399,500 |
|
$399,500 |
| Variable costs |
|
315,600 |
|
158,100 |
| Contribution margin |
|
83,900 |
|
241,400 |
| Fixed costs |
|
19,300 |
|
176,800 |
| Net income |
|
$64,600 |
|
$64,600 |
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.
Determine the effect on each company's net income if sales decrease by 11% and if sales increase by 5%. (Round answers to 2 decimal place, e.g. 10.52%. If % change is negative, enter amount with either a negative sign or parenthesis, e.g. -10.52 or (10.52).)
|
|
% Change in Net Income
|
| Sales decrease by 11% |
|
|
|
| Traditional Yams |
|
|
% |
| Auto-Yams |
|
|
% |
|
|
|
|
| Sales increase by 5% |
|
|
|
| Traditional Yams |
|
|
% |
| Auto-Yams |
|
|
% |