E6-15B Vicente Castilla of Tijuana, Mexico, is contemplating a major change in its cost structure. Currently, all of its drafting work is performed by skilled draftsmen. Cesar Cedeno, Vicente's owner, is considering replacing the draftsmen with a computerized drafting system. However, before mak- ing the change Cesar would like to know the consequences of the change, since the volume of busi- ness varies significantly from year to year. Shown below are CVP income statements for each alter- native. Manual Computerized System System Sales $1,500,000 $1,500,000 Variable costs 1,200,000 900,000 Contribution margin 300,000 600,000 Fixed costs 100,000 400,000 Net income $ 200,000 $ 200,000 Instructions (a) Determine the degree of operating leverage for each alternative. (b) Which alternative would produce the higher net income if sales increased by $100,000? (c) Using the margin of safety ratio, determine which alternative could sustain the greater decline in sales before operating at a loss