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.

a. Compute the degree of operating leverage for the company under each scenario.
b. Discuss your results.

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Old New Sales $3,000,000 $3,000,000 Variable costs 1,600,000 700,000 Contribution margin 1,400,000 2,300,000 1,900,000 Fixed costs 1,000,000 Net income $ 400,000 $ 400,000