Q4. Amazon Dynamics wants to purchase and implement new automated system to make its operations more efficient. The head of the company wants you to do an analysis of both the old system and proposed system. (10 marks) The CVP income statements are as follows:

Calculate the following

a) Degree of operating leverage under both systems and discuss your answer (4 marks)

b) Break-even point in dollars, margin of safety under both systems and discuss your answer (6 marks)

Old system Sales: 2,000,000 Variable cost 1,400,000 Contribution Margin: 600,000 Fixed cost: 400,000 Net income: 200,000 New system Sales: 2,000,000 Variable cost: 600,000 Contribution Margin: 1,400,000 Fixed cost: 1,200,000 Net income: 200,000