Subway, the fast-food restaurant franchise, came out with a promotion offering two footlong subs for $10 during the early days of the Covid-19 pandemic as a way to drive traffic to its restaurants. Franchise owners were not happy with the promotion, claiming they lost money on every sub sold. Assume that the costs related to the cost of one Subway footlong sub and the Subway franchisee include the following (assume a selling price of $10/2, or $5 per sub): Cost Item Details Cost per sandwich

Food Ingredients Per footlong average $1.95

Labor cost per footlong $16.00/hour wage rate and each worker can make 8 sandwiches per hour $2.00

Credit card transaction fee 3% of sales price

Electricity $400 per month divided by 4,000 orders per month $0.10

Rent Rent $1,600 per month divided by 4,000 orders per month $0.40

Franchise fee amortization Franchise and startup fees $43,200 divided by 180 months (15 years) divided by 4,000 orders per month $0.06

Royalty fee (paid to Subway as a franchise fee) 4% of sales price

Advertising fee (paid to Subway as a franchise fee) 7% of sales price

Equipment leasing cost $800 per month divided by 4,000 orders $0.20

NOTE: Assume all subs are paid for with a credit card What is the variable cost of each $10 footlong sub combo sold (remember that the $10 covers two subs)? Enter your answer to two decimal places. Do not enter dollar signs.