Determine the degree of operating leverage for each approach at current sales levels. (Round answers to 2 decimal places, e.g. 2.25.) Degree of operating leverage Current approach Automated approach How much would the company's net income decline under each approach with a 10% decline in sales? (Round answers to 1 decimal place, e.g. 22.5%) For a 10% drop in sales net income would by % for Current approach For a 10% drop in sales net income would by % for Automated approach Save for Later Attempts: 0 of 3 used Submit Answer Your answer is correct. Using the current level of sales, compute the margin of safety ratio under each approach. Current approach Automated approach Margin of safety ratio 25 % 20 % Compute the break-even point in sales dollars under each approach. Current approach Automated approach Break-even points in sales dollars 1530000 $ 1632000 Attempts: 1 of 3 Compute the contribution margin ratio under each approach. Current approach Contribution margin ratio Automated approach 25 % 50 % Attempts: 1 6/10 For nearly 20 years, Specialized Coatings has provided painting and galvanizing services for manufacturers in its region. Manufacturers of various metal products have relied on the quality and quick turnaround time provided by Specialized Coatings and its 20 skilled employees. During the last year, as a result of a sharp upturn in the economy, the company's sales have increased by 30% relative to the previous year. The company has not been able to increase its capacity fast enough, so Specialized Coatings has had to turn work away because it cannot keep up with customer requests. Top management is considering the purchase of a sophisticated robotic painting booth. The booth would represent a considerable move in the direction of automation versus manual labor. If Specialized Coatings purchases the booth, it would most likely lay off 15 on its skilled painters. To analyze the decision, the company compiled production information from the most recent year and then prepared a parallel compilation assuming that the company would purchase the new equipment and lay off the workers. Those data are shown below. As you can see, the company projects that during the last year it would have been far more profitable if it had used the automated approach. Current Automated Approach Approach Sales $2,040,000 $2,040,000 Variable costs 1,530,000 1,020,000 Contribution margin 510,000 1,020,000 Fixed costs 382,500 816,000 Net income $127,500 $204,000