Cullumber Modernas of Juarez, Mexico, is contemplating a major change in its cost structure. Currently, all...

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Cullumber 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, Cullumber's 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 $1,800,000 $1,800,000 Variable costs 1,440,000 720,000 Contribution margin 360,000 1,080,000 Fixed costs 120,000 840,000 Net income $240,000 $240,000 Cullumber 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, Cullumber's 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 $1,800,000 $1,800,000 Variable costs 1,440,000 720,000 Contribution margin 360,000 1,080,000 Fixed costs 120,000 840,000 Net income $240,000 $240,000

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