CASE 3 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 Net Income Personal Service System $2,500,000 1.875,000 S 625,000 125.000 500.000 Automated Self-Service System $2,500,000 1.125.000 S1,375,000 875.000 S 500.000 (d) Determine the degree of operating leverage for each alternative Which alternative would produce the higher net income if sales increased by S250,000? Using the murgin of safety ratio, determine which alternative could sustain the greater decline in sales before operating at a loss. Tusty Time's vice president of finance has offered another option. He suggests a different syftem that combines personal service at key points in the cafeteria line with a less expensive automated self-service system for the other items. The financial information on this system is given below: Blended Service System Sales $2,500,000 Variable costs 1,500,000 Contribution margin 51,000,000 Fixed costs 500.000 Net Income 5.500.000 (L) (3) Determine the degree of operating leverage for this option. How much would net income increase if sales increased by $250,000? Using the margin of safety ratio, how large of a decline in sales could this option sustain before operating at a loss. Which option do you recommend for Tasty Time Cafeteria