Question

(a)

Suppose that Snap Fitness estimates that each location incurs $4,000 per month in fixed operating expenses plus $1,460 to lease equipment. A recent newspaper article describing no-frills fitness centers indicated that a Snap Fitness site might require only 300 members to break even. Using the information provided above and your knowledge of CVP analysis, estimate the amount of variable costs. (When performing your analysis, assume that the only fixed costs are the estimated monthly operating expenses and the equipment lease.)

(b)

Using the information from part (a), what would monthly sales in members and dollars have to be to achieve a target net income of $3,640 for the month?

(c)

Provide five examples of variable costs for a fitness center.

(d)

Go to a fitness-business website, such as Curves, Snap Fitness, or Anytime Fitness, and find information about purchasing a franchise. Summarize the franchise information needed to decide whether entering into a franchise agreement would be a good idea.