View Policies Current Attempt in Progress 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 systern. 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. Sales Personal Service System $2,500,000 1,875,000 $625,000 125,000 $500,000 Automated Self-Service System $2,500,000 1,250,000 $1,250,000 Variable costs Contribution margin Fixed costs 750,000 Net Income $500,000 Determine the degree of operating leverage for each alternative. (Round answers to 2 decimal places eg. 15.25.) WE p! Net income DOUAUUU below.00 Determine the degree of operating leverage for each alternative. (Round answers to 2 decimal places, eg. 15.25.) Personal Service System Automated Self-Service System Operating leverage Which alternative would produce the higher net income if sales increased by $250,000? The would produce the higher net income. W X P. hD 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, eg 0.25.) Personal Service System Automated Self-Service System Margin of safety ratio could sustain the greater decline in sales before operating at a loss. PE hp Tasty Tiine'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 systern for the other iterns. The financial information on this system is given below: Sales Blended Service System $2,500,000 1,500,000 $1,000,000 Variable costs Contribution margin Fixed costs 500,000 Net Income $500,000 Determine the degree of operating leverage for this option. (Round answer to 2 decimal places, eg, 15.25.) WT P9 mp Sales Variable costs Contribution margin Fixed costs System $2,500,000 1,500,000 $1,000,000 500,000 $500,000 Net Income Determine the degree of operating leverage for this option. (Round answer to 2 decimal places, eg. 15.25.) Operating leverage How much would net income increase if sales increased by $250,000? (Round answer to 2 decimal places, eg. 15.25%.) xl PS - OPP hp Determine the degree of operating leverage for this option. (Round answer to 2 decimal places, ey 15.25.) Operating leverage How much would net income increase if sales increased by $250,000? (Round answer to 2 decimal places, eg. 15.25%.) Net income Using the margin of safety ratio, how large of a decline in sales could this option sustain before operating at a loss. (Round margin of safety ratio to 2 decimal places, eg. 0.25.) W O i P3 X] hp Using the margin of safety ratio, how large of a decline in sales could this option sustain before operating at a loss. (Round margin of safety ratio to 2 decimal places, eg. 0.25.) Margin of safety ratio Decline in sales % Which option do you recommend for Tasty Time Cafeteria? PS