Lobster Trap Company is considering automating its manufacturing facility. Company information before and after the proposed automation follows:

Required:

1. Calculate Lobster Trap’s break-even sales dollars before and after automation.

2. Compute Lobster Trap’s degree of operating leverage before and after automation.

3. Interpret the meaning of your calculations in requirement 2.

Transcribed Image Text:

Before Automation After Automation $198,000 78,000 Sales revenue $198,000 38,000 Less: Variable costs Contribution margin Less: Fixed costs $120,000 15,000 $105,000 $160,000 58,000 $102,000 Net operating income