You will help a fast food restaurant evaluate the benefits of installing a kiosk in the lobby to automate customer orders, thus reducing the need for cashiers. Presented here are budgeted income statements for a small fast food restaurant. The company is contemplating changing to a digital ordering system with kiosks in the lobby. Comparative budgeted income statements using traditional and digital ordering are provided in the table.

1)By combining the income statement data with and without the revenue volume changes, it is easier to compare the changes in costs and operating income. Under which model does net operating income appear to increase more when volume increases? What costs changed to create the effect on operating income? Briefly explain why this occurs.

2)Identify other factors might you need to consider when increasing volume with a digital versus a traditional face-to-face ordering system.

G H M N O a. Income statements |Traditional Ordering Will Traditional Ordering Will Digital Ordering With N Digital Orderi Digital Ordering Traditional Ordering With Traditional Ordering With Digital Ordering With No With 25% No Increase 25% Increase Increase Increase Revenue $540,000 $675,000 $540,000 $675,000 Cost of goods sold 190,000 $237,500 190,000 $237,500 Cashier labor 87,000 $108,750 21,600 $27,000 Other variable costs 17,000 $21,250 17,000 $21,250 Contribution margin 246,000 $307,500 311,400 $389,250 Depreciation 43,000 $53,750 102,000 $127,500 Other fixed costs 45,000 $56,250 45,000 $56,250 Net operating income $158,000 $197,500 $164.400 $205,500 b. Bar chart Traditional Vs Digital (with 25% increase in sales volume in both) Net operating income Other fixed costs Depreciation Contribution margin Other variable costs Cashier labor Cost of goods sold Revenue