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Ayayai Co, is contemplating a major change in its cost structure. Currently, all of its...

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Accounting

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Ayayai Co, is contemplating a major change in its cost structure. Currently, all of its drafting work is performed by skilled drafters. Mike Ayayai the owner, is considering replacing the drafters with a computerized drafting system. However, before making the change, Mike 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 Manual System $ 1,200,000 960,000 Computerized System $ 1.200.000 720,000 Variable costs Contribution margin 240,000 480,000 Fixed costs 120.000 360,000 Net income $ 120,000 $ 120,000 Determine the degree of operating leverage for each alternative Degree of Operating Leverage Manual system Computerized system

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