Question 5 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. Sales Variable costs Contribution margin Manual System $1,740,000 1,392,000 348,000 108,000 $240,000 Computerized System $1,740,000 696,000 1,044,000 804,000 $240,000 Fixed costs Net income (a) 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 1.45 Computerized System 4.35 (b) Your answer is correct. Calculate the increase in Net income for each alternative if sales increased by $142,000. Increase in Net Income Manual System 28,400 Computerized System 85,200 Which alternative would produce the higher net income? Computerized System Click if you would like to Show Work for this question: Open Show Work (c) Calculate the margin of safety ratio. (Round ratios to 2 decimal places, e.g. 0.25.) Margin of Safety ratio Manual System Computerized System Using the margin of safety ratio, determine which alternative could sustain the greater decline in sales before operating at a loss