Melinda is a potential franchisee of Subway Sandwich Shop Inc. (SSS) and is in the process of developing a business plan to present to potential investors. Following are various projected cost data for the operation: Lease of store space $500/month Equip. lease $500/month License $300/year Salaries $2,000/month Utilities $400/month Insurance $1,800/year Advertising 2.5% gross sales revenue Royalty 8% of gross sales revenue The average order sells for $4, with food cost of $2.

2. What is the contribution of each sale toward covering fixed expenses?

3. What is the projected monthly break-even point in units?

4. The potential franchisee has a target before-tax net profit of $2,000 per month. What level of sales (in units and in dollars) must be achieved?

5. The potential franchisee has a target after-tax profit of $2,400 per month. What level of sales (in units) must be achieved? Assume a tax rate of 25%.