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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

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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 480,000 Contribution margin Fixed costs 240,000 120,000 360,000 Net income $ 120,000 $ 120,000 (a) per Determine the degree of operating leverage for each alternative. Degree of Operating Leverage Manual system 2 Computerized system 4 Attempts: 1 of 1 used hans quit hakir (b) Which alternative would produce the higher net income if sales increased by $ 240,000? Thanh rquit

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