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.

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Sales Variable costs Contribution margin Fixed costs Net income Manual System $1,500,000 1,200,000 300,000 100,000 $ 200,000 Computerized System $1,500,000 600,000 900,000 700,000 $ 200,000