The B Company is located in a business park and provides take out boxed lunches (with curbside pickup) for local businesses. They have a limited menu and charge a flat price of $8.00 per boxed lunch and serve 5,000 lunches a year. The latest financial report indicates that the cost per meal includes variable costs (food and labor) of $4.00 per meal and fixed costs of $2.00 per meal. An outside catering firm has offered to prepare the lunches and charge B Company $6.00 per meal. If the lunch preparation is outsourced 75% of the fixed costs can be eliminated. In addition, the space used for food preparation can be used for another purpose that will generate $1,000 in income a year for the company.

1. Assuming the company outsources the lunch preparation function, the volume of meals and flat price per lunch remains the same, what is the financial impact of accepting the outsourcing offer?

2. In addition, in your answer make sure to indicate whether the financial impact would be an increase or decrease in cafeteria income.