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

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

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Answer 1

Answer #1

Contribution Margin ratio

Before automation = 120,000/198,000 = 60.6061%

After automation = 160,000/198,000 = 80.8081%

Breakeven sales = Fixed cost/Contribution margin ratio

1.

Breakeven before automation

= 15,000/60.6061%

24,749.98

Breakeven after automation

= 58,000/80.8081%

71,774.98

Degree of operating leverage = Contribution margin/Net income

DOL before automation

= 120,000/105,000

1.1429

DOL after automation

= 160,000/102,000

1.5686

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Answer 2

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