HELP! I need help with the part b. I have the first part a. done for you to refe

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HELP! I need help with the part b. I have the first part a. done for you to refer too.

Question 8 Arquitectos Interiores of Juarez, Mexico, is contemplating a major change in its cost structure. Currently, all of its drafting work is performed by skilled draftsmen. Alfonso Jiminez, Arquitectos' owner, is considering replacing the draftsmen with a computerized drafting system. However, before making the change, Alfonso 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 Variable costs Contribution margin Fixed costs Net income $1,673,000 1,338,400 334,600 95,600 $239,000 $1,673,000 669,200 1,003,800 764,800 $239,000 (a) Your answer is correct. Determine the degree of operating leverage for each alternative. (Round answers to 2 decimal places, e.g. 1.25.) egree of Operating Leverag 1.40 4.20 Manual System Computerized System

Explanation / Answer

Manual Computerized    $ Sales 1805000 1805000 Variable Cost 1444000 722000 Contribution 361000 1083000 Fixed cost 95600 764800 Net Income 265400 318200 Computerized syytem will produce higher net Income Variable cost increase or decreases in poropration to sales as the units are not given in the question we can take variable cost % on sales and apply same to increased sales Manual Computerized Sales 1673000 1673000 Variable Cost 1338400 669200 Variable Cost % on sales 80 40

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