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Imagen Arquitectnica of Tijuana, Mexico, is contemplating a major change in its cost structure. Currently, all of its drafting work is performed by skilled
Imagen Arquitectnica of Tijuana, Mexico, is contemplating a major change in its cost structure. Currently, all of its drafting work is performed by skilled draftspersons. Alfredo Ayala, Imagen's owner, is considering replacing the draftspersons with a computerized drafting system. However, before making the change, Alfredo would like to know its consequences, 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 $1,250,000 $1,250,000 Variable costs 1,000,000 750,000 Contribution margin 250,000 500,000 Fixed costs 125,000 375,000 Operating income $125,000 $125,000
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