TastyKreme and Krispy Kake are 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:

Required

1. Compute the operating income and degree of operating leverage for each company.

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.

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TastyKreme 20,000 Krispy Kake Estimated sales In units Unit price Varlable cost per unit Total fixed costs 15,000 8.00 3.00 $30,000 $45,000