Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Ayayai Co, is contemplating a major change in its cost structure. Currently, all of its drafting work is performed by skilled drafters. Mike Ayayai the
Ayayai Co, is contemplating a major change in its cost structure. Currently, all of its drafting work is performed by skilled drafters. Mike Ayayai the owner, is considering replacing the drafters with a computerized drafting system. However, before making the change, Mike would like to know the consequences of the change, since the volume of business varies significantly from year to year. Shown below are CVP income statements for each alternative, Sales Manual System $ 1,200,000 960,000 Computerized System $ 1.200.000 720,000 Variable costs Contribution margin 240,000 480,000 Fixed costs 120.000 360,000 Net income $ 120,000 $ 120,000 Determine the degree of operating leverage for each alternative Degree of Operating Leverage Manual system Computerized system
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started