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Blue Spruce Cafeteria operates cafeteria food services in public buildings in the Midwest. Blue Spruce is contemplating a major change in its cost structure.
Blue Spruce Cafeteria operates cafeteria food services in public buildings in the Midwest. Blue Spruce 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, Blue Spruce'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. Personal Service System Automated Self-Service System Sales $2,170,000 $2,170,000 Variable costs 1627,500 1,085,000 Contribution margin $542,500 $1,085,000 Fixed costs 108,500 651,000 Net Income $434,000 $434,000 Determine the degree of operating leverage for each alternative. (Round answers to 2 decimal places, eg 15.25) Personal Service System Automated Self-Service System Operating leverage
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