Question - Bergen Hospital is contemplating an investment in an automated surgical system. Its current process relies on the a number of skilled physicians. The new equipment would employ a computer robotic system operated by a technician. The company requested an analysis of the old technology versus the new technology. The accounting department has prepared the following CVP income statements for use in your analysis.
OLD NEW
Sales $3,126,000 $3,126,000
Variable Costs $1,553,000 $ 733,000
Contribution Margin 1,573,000 2,393,000
Fixed Costs 1,165,000 1,889,000
Net Income $408,000 $504,000
Compute the degree of operating leverage for the company under each scenario.