Question
Cullumber Arquitectnica of Tijuana, Mexico, is contemplating a major change in its cost structure. Currently, all of its drafting work is performed by skilled
Cullumber Arquitectnica of Tijuana, Mexico, is contemplating a major change in its cost structure. Currently, all of its drafting work is performed by skilled draftspersons. Mark Harris, Cullumber's owner, is considering replacing the draftspersons with a computerized drafting system. However, before making the change, Mark would like to know its consequences, since the volume of business varies significantly from year to year. Shown below are CVP income statements for each alternative: Manual System Computerized System Sales $1,140,000 $1,140,000 Variable costs 912,000 684,000 Contribution margin 228.000 456,000 Fixed costs 114,000 342.000 Operating income $114,000 $114,000
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