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. able costs tribution margin d costs Income Personal Service Automated Self-Service System System $2,040,000 $2,040,000 1,530,000 1,020,000 $510,000 $1,020,000 102,000 612,000 $408,000 $408,000 Your answer is correct. Determine the degree of operating leverage for each alternative. (Round answers to 2 decimal places, e.g. 15.25.) Personal Service System R 1.25 | Automated Self-Service System 2.5 Operating leverage e Textbook and Media Attempts: 1 of 5 used Your answer is correct. Which alternative would produce the higher net income if sales increased by $204,000? The automated self-service system would produce the higher net income. eTextbook and Media Attempts: 1 of 5 used Your answer is correct. Using the margin of safety ratio, determine which alternative could sustain the greater decline in sales before operating at a loss. (Round answers to 2 decimal places, e.g. 0.25.) Personal Service System 0.8 Automated Self-Service System 0.4 Margin of safety ratio Personal service system could sustain the greater decline in sales before operating at a loss. e Textbook and Media (d1) Your answer is correct. Tasty Time's vice president of finance has offered another option. He suggests a different system 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: Sales Variable costs Contribution margin Fixed costs Net Income Blended Service System $2,040,000 1,224,000 $816,000 408,000 $408,000 Determine the degree of operating leverage for this option. (Round answer to 2 decimal places, e.g. 15.25.) Operating leverage 2 eTextbook and Media Attempts: 1 of 5 used (d2) Your answer is incorrect. How much would net income increase if sales increased by $204,000? (Round answer to 2 decimal places, e.g. 15.25%.) Net income eTextbook and Media Assistance Used Save for Later Attempts: 3 of 5 used Submit Answer (23) The parts of this question must be completed in order. This part will be available when you complete the part above. (04) The parts of this question must be completed in order. This part will be available when you complete the part above
