Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Incorporated, to dispense frozen yogurt products under The Yogurt Place name. Mr. Swanson has assembled the following information relating to the franchise:

1. A suitable location in a large shopping mall can be rented for $4,400 per month.
2. Remodeling and necessary equipment would cost $372,000. The equipment would have a 10-year life and a $37,200 salvage value. Straight-line depreciation would be used, and the salvage value would be considered in computing depreciation.
3. Based on similar outlets elsewhere, Mr. Swanson estimates that sales would total $470,000 per year. Ingredients would cost 20% of sales.
4. Operating costs would include $87,000 per year for salaries, $5,200 per year for insurance, and $44,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Incorporated, of 12.5% of sales.

• Req 1
• Req 2A
• Req 2B
• Req 3A
• Req 3B

a contribution format income statement that shows the expected net operating income each year from the franchise outlet.

The Yogurt Place, Incorporated
Contribution Format Income Statement
Sales		$470,000
Variable expenses:
Cost of ingredients	$94,000
		94,000
		376,000
Fixed expenses:
		0
		376,000