Johns Shingle Corporation is considering the purchase of a new automated shingle-cutting machine. The new machine will

Question:

John’s Shingle is considering the purchase of a new automated shingle-cutting machine. The new machine will reduce variable labor costs but will increase depreciation expense. is expected to increase from $160,000 to $240,000. Net income is expected to be the same at $40,000. Compute the degree of operating leverage before and after the purchase of the new equipment. Interpret your results.

Contribution Margin
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