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Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Incorporated, 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 $3,500 per month b. Remodeling and necessary equipment would cost $270,000. The equipment would have a 15-year life and an $18,000 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 $300,000 per year. Ingredients would cost 20% of sales d. Operating costs would include $70,000 per year for salaries, $3,500 per year for insurance, and $27,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Incorporated, of 12.5% 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 12%, should he acquire the franchise? 3-a. Compute the payback period on the outlet 3-5. If Mr. Swanson wants a payback of four years or less, will be acquire the franchise? Complete this question by entering your answers in the tabs below. Reg 1 Reg 2A Reg 28 Reg 3A Reg 38 Prepare a contribution format income statement that shows the expected net operating income each year from the franchise outlet The Yogurt Place, Incorporated Contribution Format Income Statement Variable expenses 0 0 Fixed expenses
Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Incorporated, to dispense frozen yogurt pro 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 $3,500 per month. b. Remodeling and necessary equipment would cost $270,000. The equipment would have a 15-year life and an $18,000 sa 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 $300,000 per year. Ingredients would sales. d. Operating costs would include $70,000 per year for salaries, $3,500 per year for insurance, and $27,000 per year for util addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Incorporated, of 12.5% of sales. Required: 1. Prepare a contribution format income statement that shows the expected net operating income each year from the franchis 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 12%, should he acquire the franchise? 3-a. Compute the payback period on the outlet. 3-b. If Mr. Swanson wants a payback of four years or less, will he acquire the franchise? Complete this question by entering your answers in the tabs below. Reg 1 Reg 2A Reg 2B Reg 3A Req 3B Compute the simple rate of return promised by the outlet. (Round your final answer to the nearest whole percent.) Simple rate of return % < Req Req 28 >
Swanson has an opportunity to acquire a franchise from The Yogurt Place, Incorporated, to dispense frozen yogurt products er The Yogurt Place name. Mr. Swanson has assembled the following information relating to the franchise: suitable location in a large shopping mall can be rented for $3,500 per month. emodeling and necessary equipment would cost $270,000. The equipment would have a 15-year life and an $18,000 salvage alue. Straight-line depreciation would be used, and the salvage value would be considered in computing depreciation. Based on similar outlets elsewhere, Mr. Swanson estimates that sales would total $300,000 per year. Ingredients would cost 20% of Hales. Operating costs would include $70,000 per year for salaries, $3,500 per year for insurance, and $27,000 per year for utilities. In Eddition, Mr. Swanson would have to pay a commission to The Yogurt Place, Incorporated, of 12.5% of sales. uired: repare a contribution format income statement that shows the expected net operating income each year from the franchise outlet Compute the simple rate of return promised by the outlet If Mr. Swanson requires a simple rate of return of at least 12%, should he acquire the franchise? Compute the payback period on the outlet If Mr. Swanson wants a payback of four years or less, will he acquire the franchise? Complete this question by entering your answers in the tabs below. Reg 1 Reg 2A Req 28 Req 3A Reg 38 ompute the payback period on the outlet. (Round your answer to 1 decimal place.) yback period years < Reg 28 Req38 >