Owner Yinan Song is considering franchising her Noodles for a Song restaurant concept. She believes people will pay $ 7.50 for a large bowl of noodles. Variable costs are $ 3.00 per bowl. Song estimates monthly fixed costs for a franchise at $ 9,000.

Requirements

1. Use the contribution margin ratio approach to find a franchise’s breakeven sales in dollars.

2. Song believes most locations could generate $ 40,000 in monthly sales. Is franchising a good idea for Song if franchisees want a minimum monthly operating income of $ 13,500?