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 Sales Variable costs Contribution margin Fixed costs Net Income System $1,860,000 1,488,000 372,000 132,000 $240,000 Computerized System $1,860,000 744,000 1,116,000 876,000 $240,000 Determine the degree of operating leverage for each alternative. (Round answers to 2 decimal places, e.g. 1.25.) Manual System Computerized System Degree of Operating Leverage 1.55 4.65 LINK TO TEXT Calculate the increase in Net income for each alternative if sales increased by $130,000. Increase in Net Income 26.000 Manual System Computerized System 78,000 Which alternative would produce the higher net income? Computer System LINK TO TEXT 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