accounting 102

Tasty Time Cafeteria operates cafeteria food services in public buildings in the Midwest. Tasty Time is contemplating a major change in its cost structure. Currently, all of their cafeteria lines are staffed with hourly wage employees who hand serve the food to customers. Benson Riggs, Tasty Time's owner, is considering replacing the employees with an automated self-service system. However, before making the change, Benson would like to know the consequences of the change, since the volume of business varies significantly from location to location. Shown below are the CVP income statements for each alternative. Sales Variable costs Contribution margin Fixed costs Personal Service Automated Self-Service System System $1,950,000 $1,950,000 1,462,500 975,000 $487,500 $975,000 97,500 585,000 $390,000 $390,000 Net Income Determine the degree of operating leverage for each alternative. (Round answers to 2 decimal places, e.g. 15.25.) Personal Service System Automated Self-Service System Operating leverage e Textbook and Media Which alternative would produce the higher net income if sales increased by $195,000? The would produce the higher net income