. Make or Buy. Gramlich Corporation operates its own cafeteria for employees. The cafeteria prices are only 75 percent of the full costs of preparation. Management feels this is an important employee benefit. ASF, Inc. offers to operate the cafeteria and promises to increase the quality of menu items, reduce prices, and reduce the needed subsidy, ASF would use Gramlich's existing facilities and even transfer current cafeteria employees to its staff. ASF submitted a formal bid based on comparable services. As Gramlich's controller, you have summarized the 1998 budget for cafeteria operations and ASF's numbers from its proposal as follows:

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Comment on the numbers. Outline key issues that are of concern to you. What data will you need to collect and analyze to resolve the issues?

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Food costs.... Preparation costs... Administrative overhead Management fee Total cafeteria costs. Cafeteria revenue. Operating subsidy. Internally Managed $ 500,000 200,000 300,000 $1,000,000 800,000 $ 200,000 ASF Managed $450,000 180,000 200,000 $830,000 750,000 $ 80,000