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

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Accounting

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

Before Automation After Automation
Sales revenue $ 195,000 $ 195,000
Less: Variable cost 104,000 56,000
Contribution margin $ 91,000 $ 139,000
Less: Fixed cost 14,000 56,000
Net operating income $ 77,000 $ 83,000

Required:

1. Calculate Lobster Traps break-even sales dollars before and after automation.

2. Compute Lobster Traps degree of operating leverage before and after automation.

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