Determine the degree of operating leverage for each approach at current sales levels.

For a 10% drop in sales net income would increasedecrease by % for Current approach

For a 10% drop in sales net income would increasedecrease by % for Automated approach

		Current Approach		Automated Approach
Sales		$1,980,000		$1,980,000
Variable costs		1,584,000		1,089,000
Contribution margin		396,000		891,000
Fixed costs		297,000		712,800
Net income		$99,000		$178,200