For nearly 20 years, Pharoah Coatings has provided painting and galvanizing services for manufacturers in its region. Manufacturers of various metal products have relied on the quality and quick turnaround time provided by Pharoah Coatings and its 20 skilled employees. During the past year, as a result of a sharp upturn in the economy, the company's sales have increased by 30% relative to the previous year. The company has not been able to increase its capacity fast enough, so Pharoah Coatings has had to turn work away because it cannot keep up with customer requests. Top management is considering the purchase of a sophisticated robotic painting booth. The booth would represent a considerable move in the direction of automation versus manual labour. If Pharoah Coatings purchases the booth, it would most likely lay off 15 of its skilled painters. To analyze the decision, the company compiled production information from the most recent year and then prepared a parallel compilation assuming that the company would purchase the new equipment and lay off the workers. As you can see, the company projects that during the past year it would have been far more profitable if it had used the automated approach. Current Approach Automated Approach Sales $2.240,000 $2,240,000 Variable costs 1,120,000 672,000 Contribution margin 1,120,000 1,568,000 Fixed costs 224,000 672,000 Operating income $896,000 $896,000 Calculate the contribution margin ratio under each approach. Current Approach Contribution margin ratio Automated Approach