Owner Shan Lo is considering franchising her Happy Wok restaurant concept. She believes people will pay $5

Question:

Owner Shan Lo is considering franchising her Happy Wok restaurant concept. She believes people will pay $5 for a large bowl of noodles. Variable costs are $1.50 a bowl. Lo estimates monthly fixed costs for franchisees at $8,400.
Requirements
1. Use the ratio shortcut approach to find a franchisee’s break-even sales in dollars.
2. Is franchising a good idea for Lo if franchisees want a minimum monthly operating income of $8,750 and Lo believes that most locations could generate $25,000 in monthly sales?
Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...