Whispering Winds Cafeteria operates cafeteria food services in public buildings in the Midwest. Whispering Winds is...

Transcribed Image Text:

Whispering Winds Cafeteria operates cafeteria food services in public buildings in the Midwest. Whispering Winds 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, Whispering Winds'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. Personal Service Automated Self-Service System System Sales $2,040,000 $2,040,000 Variable costs 1,632,000 816,000 Contribution margin $408,000 $1,224,000 Fixed costs 102,000 918,000 Net Income $306,000 $306,000 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.) Margin of safety ratio Personal Service System Automated Self-Service System Personal service system could sustain the greater decline in sales before operating at a loss. Whispering Winds Cafeteria operates cafeteria food services in public buildings in the Midwest. Whispering Winds 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, Whispering Winds'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. Personal Service Automated Self-Service System System Sales $2,040,000 $2,040,000 Variable costs 1,632,000 816,000 Contribution margin $408,000 $1,224,000 Fixed costs 102,000 918,000 Net Income $306,000 $306,000 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.) Margin of safety ratio Personal Service System Automated Self-Service System Personal service system could sustain the greater decline in sales before operating at a loss.