Chow Foods operates a cafeteria for its employees. The operations of the cafeteria requires fixed costs of P470,000 per month and variable costs of 40% of sales. Cafeteria sales are currently averaging P1,200,000 per
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Chow Foods operates a cafeteria for its employees. The operations of the cafeteria requires fixed costs of
P470,000 per month and variable costs of 40% of sales. Cafeteria sales are currently averaging P1,200,000 per
month. The company has the opportunity to replace the cafeteria with vending machines. Gross customer
spending at the vending machines is estimated to be 40% greater than the current sale because the vending
machines are available at all hours. By replacing the cafeteria with vending machines, the company would
receive 16% of the gross customer spending and avoid cafeteria costs. A decision to replace the cafeteria with
vending machines will result in a monthly increase (decrease) in operating income of
a. P182,000
b. P258,000
c. (P588,000)
d. P18,800
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