You are the manager of a sub shop located near a college campus. The college has recently added a fast-food style cafe' to the student center, which has reduced the number of students eating at your restaurant. Your highest margin items are drinks (a contribution margin of approximately 90%) and vegetarian subs (a contribution margin of approximately 75%).

1. How can you use CVP analysis to help you compete with the college's cafe'?

2. What would you suggest as possible ways to increase business while maintaining target net income levels?