Rexfield Corp., a company specializing in Crime Scene Investigation (CSI), is contemplating an investment in automated mass-spectrometers. Its current process relies on a high number of lab technicians. The new equipment would employ a computerized expert system. The company's CEO has requested a comparison of the old technology versus the new technology. The accounting department has prepared the following CVP income statements for use in your analysis. Use the information provided to do the following.

CSI EQUIPMENT OLD NEW

Sales P 2,000,000.00 P 2,000,000.00 Variable Costs P 1,400,000.00 P 600,000.00

Contribution Margin P 600,000.00 P 1,400,000.00

Fixed Costs P 400,000.00 P 1,200,000.00 Net Income P 200,000.00 P 200,000.00

a. Compute the degree of operating leverage for the company under each scenario.

b. Discuss your results.