Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Joe Swanson has an opportunity to acquire a franchise from the Yogurt Place, Inc. to dispense frozen yogurt products under the name The Yogurt Place

image text in transcribed
image text in transcribed
Joe Swanson has an opportunity to acquire a franchise from the Yogurt Place, Inc. to dispense frozen yogurt products under the name The Yogurt Place Swanson hos assembled the following information relating to the franchise: 2. A suitable location in a large shopping mall can be rented for $5,100 per month b. Remodelling and necessary equipment would cost $371,000. The equipment would have a 15-year life and an $12.500 salvage value. Straight-line depreciation would be used. On the basis of similar outlets elsewhere, Swanson estimated that sales would total $338,000 per year. Ingredients would cost 20% of sales d. Operating costs would include $66,500 per year for salaries, $5,950 per year for insurance, and $30,900 per year for utilities. In addition, Swanson would have to pay a commission to The Yogurt Place of 12.5% of sales, Required: 1. Prepare a contribution format income statement that shows the expected net operating income each year from the franchise outlet JOE SWANSON Income Statement Deduct Operating expenses Total operating expenses 2-a. Compute the simple rate of return promised by the outlet. (Round your answer to 2 decimal places, ie, 0.1234 should be considered as 12.34%).) Simple rate of rubu % 2.6. If Swanson requires a simple rate of retum of at least 8.5% should he acquire the franchise? Yes No 3a. Compute the payback period on the outlet (Round your answer to 1 decimal place) Po porod years 3-6. If Swanson wants a payback of four years or less, wil he acquire the franchise? Yes NO

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Audit Principle 5 Powerful Steps To Align Your Life With The Laws Of Success

Authors: Jane Ann Craig

1st Edition

1732729107, 978-1732729100

More Books

Students also viewed these Accounting questions