Bergen Hospital is contemplating an investment in an automated surgical system. Its current process relies on the a number of skilled physicians. The new equipment would employ a computer robotic system operated by a technician. The company requested an analysis of the old technology versus the new technology. The accounting department has prepared the following CVP income statements for use in your analysis.

OLD NEW

Sales $3,126,000 $3,126,000

Variable Costs $1,553,000 $ 733,000

Contribution Margin 1,573,000 2,393,000

Fixed Costs 1,165,000 1,889,000

Net Income $408,000 $504,000

Compute the degree of operating leverage for the company under each scenario. (Round answers to 1 decimal place)

Degree of Operating Leverage

Old

New