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Exercise 19-15 a-c Casas Modernas of Juarez, Mexico, is contemplating a major change in its cost structure. Currently, all of its drafting work is
Exercise 19-15 a-c Casas Modernas of Juarez, Mexico, is contemplating a major change in its cost structure. Currently, all of its drafting work is performed by skilled draftsmen. Rafael Jiminez, Casas' owner, is considering replacing the draftsmen with a computerized drafting system. However, before making the change, Rafael would like to know the consequences of the change, since the volume of business varies significantly from year to year. Shown below are CVP income statements for each alternative. Manual System Sales Computerized System $1,620,000 $1,620,000 648,000 324,000 972,000 84,000 $240,000 732,000 $240,000 Variable costs Contribution margin Fixed costs Net income 1,296,000 Your answer is correct. Determine the degree of operating leverage for each alternative. (Round answers to 2 decimal places, e.g. 1.25.) Degree of Operating Leverage Manual System Computerized System LINK TO TEXT 1.35 4.05
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