Question 6 of 8 > 1.67/5 E Pharoah 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, Pharoah's owner, 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 Sales $1,860,000 $1,860,000 Variable costs 1,488,000 744,000 Contribution margin 372,000 1.116,000 Fixed costs 132,000 876,000 Net income $240.000 $240,000 (a) Your answer is correct. Determine the degree of operating leverage for each alternative. (Round answers to 2 decimal places, eg. 1.25.) Degree of Operating Leverage Manual System 1.55 Computerized System 4.65 e Textbook and Media Attempts: 1 of 3 used Using multiple attempts will impact your score. 10% score reduction after attempt 2 Question 6 of 8 1.67 / 5 E (b) Calculate the increase in Net income for each alternative if sales increased by $110,000 due to an increase in the number of units sold. Increase in Net Income Manual System Computerized System $ Which alternative would produce the higher net income? e Textbook and Media Save for Later Attempts: 0 of 3 used Submit Answer Using multiple attempts will impact your score. 10% score reduction after attempt 2 (c) Calculate the margin of safety ratio for the original scenarios in Part a. (Round ratios to 2 decimal places, eg. 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. e Textbook and Media Save for Later Attempts: 0 of 3 used Submit