ComfortCraft manufactures swivel seats for customized vans. It c

ComfortCraft manufactures swivel seats for customized vans. It currently manufactures 10,000 seats per year, which it sells for $480 per seat. It incurs variable costs of $180 per seat and fixed costs of $2,200,000. It is considering automating the upholstery process, which is now largely manual. It estimates that if it does so, its fixed costs will be $3,200,000, and its variable costs will decline to $80 per seat.

Instructions
With the class divided into groups, answer the following questions.
(a) Prepare a CVP income statement based on current activity.
(b) Compute contribution margin ratio, break-even point in dollars, margin of safety ratio, and degree of operating leverage based on current activity.
(c) Prepare a CVP income statement assuming that the company invests in the automated upholstery system.
(d) Compute contribution margin ratio, break-even point in dollars, margin of safety ratio, and degree of operating leverage assuming the new upholstery system is implemented.
(e) Discuss the implications of adopting the new system.