Costs General fixed operating expenses $3,975 per month Equipment Lease $410 per month Towel service $ 50 per member based on volume Mixed costs are equal to $275 per month (fixed) plus $1 10 per membership sale (variable) Total variable costs are not known Estimated number of members required to break even is between 255 and 275 members per month Part 1, Section 1 Use the following formula in order to determine total variable costs Sales Variable Costs Fixed Costs Net Income Add the problem data to the formula and solve for the missing piece of the equation (i e variable costs) 1 Membership sales is equal to sales volume times the price per member 2 Total variable costs is not known Enter X in the above formula 3 Total fixed costs are provided with the problem Enter fixed costs in the above formula 4 Net income at the break even is equal to zero Enter 0 in the above formula for net income 5 Solve the equation X total variable costs The above formula determines total variable costs at the break even Part 1, Section 2 Use the solution from part 1, section 1 (i e variable costs) in order to calculate the contribution margin (i e sales variable costs) on a per unit (member) basis In addition to fixed costs, add targeted net income equal to $14,500 Contribution Margin Sales membership sales times the price per member Minus Variable Costs See solution in part 1, section 1 Equals Contribution Margin in dollars Contribution Margin in dollars number of memberships contribution margin per member The next step is to determine what would monthly sales in members and dollars have to be to achieve a target net income equal to $14,500 for the month Utilize the CVP formula (fixed costs contribution margin per member) to finalize the problem Compute the margin of safety Firstly, the above scenario is a service based revenue that has been incurred Calculation of monthly sales Cost of services net service revenue, which is $4,661 60 $14,500 $9,838 40 is the gross profits The, gross profits operating expenses, which is $9,838 40 $3,975 $13,813 40 Therefore, operating income would be, gross profits expenses, which is $9,838 40 13,813 40 3,975 is the operating income Section 2 Monthly membership fee is $28 net income monthly target is $14,500 $14,500 $28 $517 85 would be monthly sales Margin of safety is break even sales projected sales , which is $28 530 $14,840( break even sales) $14,500 $340 Section 3 Profitability is calculated as follows revenue cost of goods sold revenue 100 $14,500 $4,662 70 $14,500 100 $0 678 would be the profit margin Some of the internal accounting reports would be cash reports, status reports, financial reports, budget books board reports These reports are prepared to be aware of the company's activities to check on the financial health of the company to make some key decisions the question starts at part 1 section 1 its asking you to calcuate just reread what I posted the question is long and here is the entire question its in parts and broken down into sections Case Study In addition to regular gyms, nontraditional workout concepts and centers such as Kosama are increasing in popularity Kosama is a franchise opportunity that offers members the opportunity to improve their health and fitness level To learn more about the company visit kosama com Part 1, Section 1 Assume the following revenue and cost break down Revenue Monthly membership fee $28 Costs General fixed operating expenses $3,975 per month Equipment Lease $410 per month Towel service $ 50 per member based on volume Mixed costs are equal to $275 per month (fixed) plus $1 10 per membership sale (variable) Total variable costs are not known Estimated number of members required to break even is between 255 and 275 members per month Using the information provided estimate the amount of variable costs When performing your analysis, assume that the only fixed costs are the estimated monthly operating expenses, equipment lease and the fixed part of mixed costs Show your work and all calculations Part 1, Section 2 Using the information from section 1 What would monthly sales in members and dollars have to be to achieve a target net income of $14,500 for the month What is the margin of safety in dollars Show your work and all calculations Part 1, Section 3 Discuss how cost structure, relevant range, margin of safety, cost behaviors, and CVP apply to an investment in the franchise How do you plan to use this in order to manage the business and plan for profitability What type of internal accounting reports would you prepare Why Part 1, Section 4 Assume you decide to invest in the franchise Provide a description and estimates in dollars for sales, variable and fixed expenses Explain how you determined each number and provide a written list of assumptions The following is additional explanations and resources Part 1, Section 1 Use the following formula in order to determine total variable costs Sales Variable Costs Fixed Costs Net Income Add the problem data to the formula and solve for the missing piece of the equation (i e variable costs) 1 Membership sales is equal to sales volume times the price per member 2 Total variable costs is not known Enter X in the above formula 3 Total fixed costs are provided with the problem Enter fixed costs in the above formula 4 Net income at the break even is equal to zero Enter 0 in the above formula for net income 5 Solve the equation X total variable costs The above formula determines total variable costs at the break even Part 1, Section 2 Use the solution from part 1, section 1 (i e variable costs) in order to calculate the contribution margin (i e sales variable costs) on a per unit (member) basis In addition to fixed costs, add targeted net income equal to $14,500 Contribution Margin Sales membership sales times the price per member Minus Variable Costs See solution in part 1, section 1 Equals Contribution Margin in dollars Contribution Margin in dollars number of memberships contribution margin per member The next step is to determine what would monthly sales in members and dollars have to be to achieve a target net income equal to $14,500 for the month Utilize the CVP formula (fixed costs contribution margin per member) to finalize the problem Compute the margin of safety Part 1 Section 4 You need to estimate project sales, variable, and fixed expenses for your business The first step is to determine a physical location for your franchise (i e city state) Once this is identified, begin researching what the average monthly fee is for comparable fitness clubs in your area The monthly fee per customer will help you determine sales revenue The next step is to estimate your expenses Do you plan to buy a building or sign a lease Real estate is typically leased based on square footage How many square feet does your business require and what is the cost per square foot based on the location of your business In addition to the lease expense, do you expect to incur additional fixed expenses such as the purchase of fitness equipment Finally, you need to determine all of your variable expenses This could include hourly wages, sales commissions, utilities, etc Assumptions Explain how you developed estimates for sales revenue and business expenses and list any assumptions Example 1 Explain how you developed your monthly fee and volume estimates 2 Discuss why you decided to rent or buy a building and the related costs such as rent per square foot based on, in part, the location of your business 5 34 , LTE E Firstly, the above scenario is a service based revenue that has been incurred Calculation of monthly sales Cost of services net service revenue, which is $4,661 60 $14,500 $9,838 40 is the gross profits The, gross profitstoperating expenses, which is $9,838 40 $3,975 $13,813 40 Therefore, operating income would be, gross profits expenses, which is $9,838 40 13,813 40 3,975 is the operating income Section 2 Monthly membership fee is $28 net income monthly target is $14,500 S14,500 S28 $517 85 would be monthly sales Margin of safety is break even sales projected sales, which is $28 530 $14,840( break even sales) $14,500 $340 Section 3 Profitability is calculated as follows revenue cost of goods sold revenue 100 $14,500 S4,662 70 $14,500 100 50 678 would be the profit margin Some of the internal accounting reports would be cash reports, status reports, financial reports, budget books board reports These reports are prepared to be aware of the company's activities to check on the financial health of the company to make some key decisions 5 34 , LTE E Firstly, the above scenario is a service based revenue that has been incurred Calculation of monthly sales Cost of services net service revenue, which is $4,661 60 $14,500 $9,838 40 is the gross profits The, gross profitstoperating expenses, which is $9,838 40 $3,975 $13,813 40 Therefore, operating income would be, gross profits expenses, which is $9,838 40 13,813 40 3,975 is the operating income Section 2 Monthly membership fee is $28 net income monthly target is $14,500 S14,500 S28 $517 85 would be monthly sales Margin of safety is break even sales projected sales, which is $28 530 $14,840( break even sales) $14,500 $340 Section 3 Profitability is calculated as follows revenue cost of goods sold revenue 100 $14,500 S4,662 70 $14,500 100 50 678 would be the profit margin Some of the internal accounting reports would be cash reports, status reports, financial reports, budget books board reports These reports are prepared to be aware of the company's activities to check on the financial health of the company to make some key decisions

Question

Costs   General fixed operating expenses   $3,975 per month   Equipment Lease   $410 per month   Towel service   $ 50 per member based on volume   Mixed costs are equal to $275 per month (fixed) plus $1 10 per membership sale (variable)   Total variable costs are not known   Estimated number of members required to break even is between 255 and 275 members per month  Part 1, Section 1  Use the following formula in order to determine total variable costs  Sales   Variable Costs   Fixed Costs   Net Income  Add the problem data to the formula and solve for the missing piece of the equation (i e  variable costs)  1  Membership sales is equal to sales volume times the price per member  2  Total variable costs is not known  Enter X in the above formula  3  Total fixed costs are provided with the problem  Enter fixed costs in the above formula  4  Net income at the break even is equal to zero  Enter 0 in the above formula for net income  5  Solve the equation  X   total variable costs  The above formula determines total variable costs at the break even  Part 1, Section 2  Use the solution from part 1, section 1 (i e  variable costs) in order to calculate the contribution margin (i e  sales   variable costs) on a per unit (member) basis  In addition to fixed costs, add targeted net income equal to $14,500  Contribution Margin  Sales  membership sales times the price per member Minus Variable Costs  See solution in part 1, section 1  Equals  Contribution Margin in dollars Contribution Margin in dollars   number of memberships   contribution margin per member  The next step is to determine what would monthly sales in members and dollars have to be to achieve a target net income equal to $14,500 for the month  Utilize the CVP formula (fixed costs   contribution margin per member) to finalize the problem  Compute the margin of safety  Firstly, the above scenario is a service based revenue that has been incurred  Calculation of monthly sales  Cost of services net service revenue, which is  $4,661 60 $14,500   $9,838 40 is the gross profits  The, gross profits operating expenses, which is   $9,838 40 $3,975   $13,813 40  Therefore, operating income would be, gross profits expenses, which is $9,838 40 13,813 40   3,975 is the operating income  Section 2 Monthly membership fee is $28   net income monthly target is $14,500  $14,500 $28   $517 85 would be monthly sales  Margin of safety is break even sales projected sales , which is  $28  530   $14,840( break even sales)   $14,500   $340  Section 3  Profitability is calculated as follows  revenue cost of goods sold revenue 100    $14,500 $4,662 70 $14,500 100    $0 678   would be the profit margin  Some of the internal accounting reports would be  cash reports, status reports, financial reports, budget books   board reports  These reports are prepared to be aware of the company's activities   to check on the financial health of the company   to make some key decisions  the question starts at part 1 section 1 its asking you to calcuate just reread what I posted the question is long and here is the entire question its in parts and broken down into sections  Case Study  In addition to regular gyms, nontraditional workout concepts and centers such as Kosama are increasing in popularity  Kosama is a franchise opportunity that offers members the opportunity to improve their health and fitness level  To learn more about the company visit kosama com  Part 1, Section 1  Assume the following revenue and cost break down  Revenue   Monthly membership fee   $28  Costs   General fixed operating expenses   $3,975 per month   Equipment Lease   $410 per month   Towel service   $ 50 per member based on volume   Mixed costs are equal to $275 per month (fixed) plus $1 10 per membership sale (variable)   Total variable costs are not known   Estimated number of members required to break even is between 255 and 275 members per month  Using the information provided estimate the amount of variable costs  When performing your analysis, assume that the only fixed costs are the estimated monthly operating expenses, equipment lease and the fixed part of mixed costs  Show your work and all calculations  Part 1, Section 2  Using the information from section 1  What would monthly sales in members and dollars have to be to achieve a target net income of $14,500 for the month  What is the margin of safety in dollars  Show your work and all calculations  Part 1, Section 3  Discuss how cost structure, relevant range, margin of safety, cost behaviors, and CVP apply to an investment in the franchise  How do you plan to use this in order to manage the business and plan for profitability  What type of internal accounting reports would you prepare  Why  Part 1, Section 4  Assume you decide to invest in the franchise  Provide a description and estimates in dollars for sales, variable and fixed expenses  Explain how you determined each number and provide a written list of assumptions  The following is additional explanations and resources  Part 1, Section 1  Use the following formula in order to determine total variable costs  Sales   Variable Costs   Fixed Costs   Net Income  Add the problem data to the formula and solve for the missing piece of the equation (i e  variable costs)  1  Membership sales is equal to sales volume times the price per member  2  Total variable costs is not known  Enter X in the above formula  3  Total fixed costs are provided with the problem  Enter fixed costs in the above formula  4  Net income at the break even is equal to zero  Enter 0 in the above formula for net income  5  Solve the equation  X   total variable costs  The above formula determines total variable costs at the break even  Part 1, Section 2  Use the solution from part 1, section 1 (i e  variable costs) in order to calculate the contribution margin (i e  sales   variable costs) on a per unit (member) basis  In addition to fixed costs, add targeted net income equal to $14,500  Contribution Margin  Sales  membership sales times the price per member Minus Variable Costs  See solution in part 1, section 1  Equals  Contribution Margin in dollars Contribution Margin in dollars   number of memberships   contribution margin per member  The next step is to determine what would monthly sales in members and dollars have to be to achieve a target net income equal to $14,500 for the month  Utilize the CVP formula (fixed costs   contribution margin per member) to finalize the problem  Compute the margin of safety  Part 1 Section 4  You need to estimate project sales, variable, and fixed expenses for your business  The first step is to determine a physical location for your franchise (i e  city   state)  Once this is identified, begin researching what the average monthly fee is for comparable fitness clubs in your area  The monthly fee per customer will help you determine sales revenue  The next step is to estimate your expenses  Do you plan to buy a building or sign a lease  Real estate is typically leased based on square footage  How many square feet does your business require and what is the cost per square foot based on the location of your business  In addition to the lease expense, do you expect to incur additional fixed expenses such as the purchase of fitness equipment  Finally, you need to determine all of your variable expenses  This could include hourly wages, sales commissions, utilities, etc  Assumptions  Explain how you developed estimates for sales revenue and business expenses and list any assumptions  Example  1  Explain how you developed your monthly fee and volume estimates  2  Discuss why you decided to rent or buy a building and the related costs such as rent per square foot based on, in part, the location of your business  5 34  , LTE E Firstly, the above scenario is a service based revenue that has been incurred  Calculation of monthly sales  Cost of services net service revenue, which is  $4,661 60 $14,500   $9,838 40 is the gross profits  The, gross profitstoperating expenses, which is   $9,838 40 $3,975   $13,813 40  Therefore, operating income would be, gross profits expenses, which is $9,838 40 13,813 40   3,975 is the operating income  Section 2 Monthly membership fee is $28   net income monthly target is $14,500  S14,500 S28   $517 85 would be monthly sales  Margin of safety is break even sales projected sales, which is  $28 530   $14,840( break even sales)   $14,500   $340  Section 3  Profitability is calculated as follows  revenue cost of goods sold revenue 100  $14,500 S4,662 70 $14,500 100   50 678   would be the profit margin  Some of the internal accounting reports would be  cash reports, status reports, financial reports, budget books   board reports  These reports are prepared to be aware of the company's activities   to check on the financial health of the company   to make some key decisions  5 34  , LTE E Firstly, the above scenario is a service based revenue that has been incurred  Calculation of monthly sales  Cost of services net service revenue, which is  $4,661 60 $14,500   $9,838 40 is the gross profits  The, gross profitstoperating expenses, which is   $9,838 40 $3,975   $13,813 40  Therefore, operating income would be, gross profits expenses, which is $9,838 40 13,813 40   3,975 is the operating income  Section 2 Monthly membership fee is $28   net income monthly target is $14,500  S14,500 S28   $517 85 would be monthly sales  Margin of safety is break even sales projected sales, which is  $28 530   $14,840( break even sales)   $14,500   $340  Section 3  Profitability is calculated as follows  revenue cost of goods sold revenue 100  $14,500 S4,662 70 $14,500 100   50 678   would be the profit margin  Some of the internal accounting reports would be  cash reports, status reports, financial reports, budget books   board reports  These reports are prepared to be aware of the company's activities   to check on the financial health of the company   to make some key decisions

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Question

Costs: -General fixed operating expenses = $3,975 per month. -Equipment Lease = $410 per month. -Towel service = $.50 per member based on volume. -Mixed

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