1. Suppose your answer for question #1 was $10.17 in total variable costs per two sub deal. All other costs that are fixed costs are the same as in the table above. If a franchise owner offers this special pricing ($10.00) for two subs, how much incremental contribution margin (or loss) will they earn for each deal sold? If your answer is a loss be sure to put a negative sign in front of your answer.

2. Which costs are NOT relevant to this pricing decision?

Advertising Fee

Equipment Leasing Cost

Franchise Fee

Electricity

Rent

Food costs

Credit Card Fee

Labor Costs

Royalty Fee