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Please only answer part b thank you Casas Modernas of Juarez, Mexico, is contemplating a major change in its cost structure. Currently, all of its
Please only answer part b thank you
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 System Computerized System $1,860,000 744,000 Sales Variable costs Contribution margin Fixed costs $1,860,000 1,488,000 372,000 132,000 $240,000 1,116,000 876,000 $240,000 Net income (a) Your Answer Correct Answer Your answer is correct. Determine the degree of operating leverage for each alternative. (Round answers to 2 decimal places, e.g. 1.25.) Degree of Operating Leverage Manual System 1.55 Computerized System 4.65 (b). Calculate the increase in Net income for each alternative if sales increased by $116,000. Increase in Net Income Manual System $ Computerized System Which alternative would produce the higher net incomeStep by Step Solution
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