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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.
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 $5,000 per month. b. Remodeling and necessary equipment would cost $408,000. The equipment would have a 20-year life and an $20,400 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, Inc., c. Based on similar outlets elsewhere, Mr. Swanson estimates that sales would total $530,000 per year. d. Operating costs would include $93,000 per year for salaries, $5,800 per year for insurance, and $50,000 of 15.5% 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 Variable expenses: Selling and administrative expenses
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