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How do I find the Simple Rate of Return and also the Payback Period??? Paul Swanson has an opportunity to acquire a franchise from The
How do I find the Simple Rate of Return and also the Payback Period???
Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Inc., to dispense frozen yogurt products under The Yogurt Place name. Mr. Swanson has assembled the following information relating to the franchise: a. A suitable location in a large shopping mall can be rented for $4,500 per month. b. Remodeling and necessary equipment would cost $378,000. The equipment would have a 10-year life and an $37,800 salvage value. Straight-line depreciation would be used, and the salvage value would be considered in computing depreciation Ingredients would cost 20% of sales. per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, c. Based on similar outlets elsewhere, Mr. Swanson estimates that sales would total $480,000 per year. d. Operating costs would include $88,000 per year for salaries, S5,300 per year for insurance, and $45,000 Inc., of 13.0% of sales. Required 1. Prepare a contribution format income statement that shows the expected net operating income each year from the franchise outlet. PAUL SWANSON Contribution Format Income Statement Sales 480,000 Variable expenses Cost of ingredients 96,000 62,400 158,400 Contribution margin Selling and administrative expenses: 321,600 88,000 54,000 34,020 5,300 45,000 Salaries Rent Utilities 226,320 Net operating income 95,280
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