Reference no: EM131289476

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. Manual System Computerized System Sales $1,500,000 $1,500,000 Variable costs 1,200,000 600,000 Contribution margin 300,000 900,000 Fixed costs 100,000 700,000 Net income $200,000 $200,000 Calculate the margin of safety ratio for manual and computerized system.