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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.
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 $3,300 per month b. Remodeling and necessary equipment would cost $306,000. The equipment would have a 15 year life and a $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 $360,000 per year. Ingredients would cost 20% of sales d. Operating costs would include $76,000 per year for salaries, $4,100 per year for insurance, and $33,000 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 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 17%, should he acquire the franchise? 3-b. If Me 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 3 Reg 3 Prepare a contribution format income statement that shows the expected net operating income each year from the franchise outlet Reg 1 Reg 2A Reg 2B Reg 3A Reg 3B Prepare a contribution format income statement that shows the expected net operating income each year from the franchise outlet The Yogurt Place, Inc. Contribution Format Income Statement Variable expenses 0 0 Fixed expenses 0 Reg 2A > Complete this question by entering your answers in the tabs below. Reg 1 Req 2A Reg 28 Rea 3A Reg 3B Reg 3 Compute the simple rate of return promised by the outlet. (Round your answer to 1 decimal place.) Simple rate of return % Complete this question by entering your answers in the tabs below. Req 1 Reg 2A Reg 28 Reg 3A Reg 38 If Mr. Swanson requires a simple rate of return of at least 17%, should he acquire the franchise? Yos ONO (Reg 2A ReqSA > Complete this question by entering your answers in the tabs below. Reg 1 Reg 2A Reg 2B Reg 3 Reg 38 Compute the payback period on the outlet. (Round your answer to 1 decimal place.) Payback period years
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