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 Computerized System Sales Variable costs Contribution margin Fixed costs $1,800,000 1,440,000 360,000 120,000 $240.000 $1,800,000 720,000 1,080,000 840,000 $240,000 Net income 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 Calculate the increase in Net income for each alternative if sales increased by $118,000. Increase in Net Income Manual System Computerized System Calculate the increase in Net income for each alternative if sales increased by $118,000. Increase in Net Income Manual System Computerized System Which alternative would produce the higher net income? Calculate the margin of safety ratio. (Round ratios to 2 decimal places, e.g. 0.25.) Margin of Safety ratio Manual System Computerized System Using the margin of safety ratio, determine which alternative could sustain the greater decline in sales before operating at a loss. Click if you would like to Show Work for this question: Open Show Work