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 $2,800 per month. b. Remodeling and necessary equipment would cost $276,000. The equipment would have a 20-year life and a $13,800 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 $310,000 per year. Ingredients would cost 20% of sales. d. Operating costs would include $71,000 per year for salaries, $3,600 per year for insurance, and $28,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Inc., of 13.0% of sales. Required: 1. Prepare a contribution format income statement that shows the expected net operating income each year from the franchise outlet. 2-a. Compute the simple rate of return promised by the outlet 2-b. If Mr. Swanson requires a simple rate of return of at least 15%, should he acquire the franchise? 3-a. Compute the payback period on the outlet 3b. 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. Req 1 Reg 2A Req 2B Reg 3B Reg Prepare a contribution format income statement that shows the expected net operating income each year from the franchise outlet. The Yogurt Place, Inc., thutinn Format Income Statement b. Remodeling and necessary equipment would cost $27 The equipment would have a 20-year life and a $13,800 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 $310,000 per year. Ingredients would cost 20% sales. d. Operating costs would include $71,000 per year for salaries, $3,600 per year for insurance, and $28,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Inc., of 13.0% of sales. Required: 1. Prepare a contribution format income statement that shows the expected net operating income each year from the franchise ou 2-a. Compute the simple rate of return promised by the outlet 2-b. If Mr. Swanson requires a simple rate of return of at least 15%, should he acquire the franchise? 3-a. Compute the payback period on the outlet. 3-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. Reg 3B Reg 1 Req 2A Req Req 2B Compute the simple rate of return promised by the outlet. (Round your answer to 1 decimal place.) % Simple rate of return Reg 28 > 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 $310,000 per year. Ingredients would cost 20% sales. d. Operating costs would include $71,000 per year for salaries, $3,600 per year for insurance, and $28,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Inc., of 13.0% of sales. Required: 1. Prepare a contribution format income statement that shows the expected net operating income each year from the franchise outle 2-a. Compute the simple rate of return promised by the outlet 2-b. If Mr. Swanson requires a simple rate of return of at least 15%, should he acquire the franchise? 3-a. Compute the payback period on the outlet. 3-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. Reg 1 Reg 2A Reg 28 Reg 3A A Req 3B If Mr. Swanson wants a payback of three years or less, will he acquire the franchise? Yes No
