Question
Pharoah Hospital is contemplating an investment in an automated surgical system. Its current process relies on the a number of skilled physicians. The new equipment
Pharoah Hospital is contemplating an investment in an automated surgical system. Its current process relies on the a number of skilled physicians. The new equipment would employ a computer robotic system operated by a technician. The company requested an analysis of the old technology versus the new technology. The accounting department has prepared the following CVP income statements for use in your analysis.
Old | New | |||
---|---|---|---|---|
Sales | $ 3,360,000 | $ 3,360,000 | ||
Variable costs | 1,926,400 | 627,200 | ||
Contribution margin | 1,433,600 | 2,732,800 | ||
Fixed costs | 985,600 | 2,284,800 | ||
Net income | $ 448,000 | $ 448,000 |
(a) Compute the degree of operating leverage for the company under each scenario. (Round answers to 2 decimal places, e.g. 15.72.)
Degree of operating leverage | ||
---|---|---|
Old | enter a value rounded to 2 decimal places | |
New | enter a value rounded to 2 decimal places |
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