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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 draftspersons.

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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 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: Computerized Manual System System Sales $1,220,000 $1,220,000 Variable costs 976,000 732,000 Contribution margin 244,000 488.000 Fixed costs 122.000 366,000 Operating income $122.000 $122.000 Determine the degree of operating leverage for each alternative. (Round answer to 2 decimal places, es 15.25) Operating leverage Manual System Computerized System cTextbook and Media Question Part Score --/2 Calculate which alternative would produce the higher operating income if sales increased by $122.000 would produce a higher operating income Using the margin of safety ratio, determine which alternative could sustain the greater decline in sales before operating ata loss. (Round margin of safety ratlo to 2 decimal places, es 15.25%) Margin of Safety Ratio Manual Computerized % could sustain the greater decline in sales before operating at a loss

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