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.
c.	Based on similar outlets elsewhere, Mr. Swanson estimates that sales would total $530,000 per year. Ingredients would cost 20% of sales.
d.	Operating costs would include $93,000 per year for salaries, $5,800 per year for insurance, and $50,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Inc., 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.

Note: in order to fill the below table, kindly select from the following:

Ending merchandise inventory

Advertising

Insurance

Commissions

Beginning merchandise inventory

Cost of ingredient

Deprecation

Direct labor

Direct materials

Purchases

Rent

Salaries

Sales

Utilities

PAUL SWANSON
CONTRIBUTION FORMAT INCOME STATEMENT
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Variable expenses
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Selling and administrative expenses
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Net operationg income/loss		?