Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, incorporated, to dispense frozen yogurt products under The Yogurt Place name. Me.

image text in transcribed
image text in transcribed
Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, incorporated, to dispense frozen yogurt products under The Yogurt Place name. Me. Swanson has assembled the following information relating to the franchise: a. A suitable location in a large shopping mall can be rented for $3,900 per month. b. Remodeling and necessary equipment would cost $342,000. The equipment would have a 15 -year life and a $22,800 salvage value. Straight-line depreciation would be used, and the salvage value would be considered in computing depreciation c. Based on similar outlets elsewhere, Mr. Swanson estimates that sales would total $420,000 per year. Ingredients would cost 20% of sales d. Operating costs would include $82,000 per year for salaries, $4,700 per year for insurance, and $39,000 per year for utilties in addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Incorporated, of 13.5% of sales. Required: 1. Prepare a contrbution format income statement that shows the expected net operating income each year from the franchise outiet. 2. Compute the simple rate of return promised by the outiet 2-b. If Mr. Swanson requires a simple rate of return of at least 18%, should he ecquire the franchise? 3-a. Compute the payback penod on the outlet 3-b. If Mr. Swanson wants a poyback of three years or less, will he acquire the franchise? Complete this question by entering your answers in the tabs below. Prepare a contribution format income statement that shows the expected net operating income each yoar from the franchise -a. Yumpute yie paywain peivu vil de vurted. -b. If Mr. Swanson wants a payback of three years or less. will he acquire the franchise? Complete this question by entering your answers in the tabs below. Prepare a contribution format income statement that shows the expected net operating income each year from the franchise outlet

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

Auditing For Managers The Ultimate Risk Management Tool

Authors: K. H. Spencer Pickett, Jennifer M. Pickett

1st Edition

0470090987, 978-0470090985

More Books

Students also viewed these Accounting questions

Question

What is the difference between a database and a table?

Answered: 1 week ago