Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Incorporated, to dispense...
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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. He assembled the following information relating to the franchise: a. A suitable location in a large shopping mall can be rented for $3,800 per month. b. Remodeling and necessary equipment would cost $336,000. The equipment would have a 20-year life and a $16,800 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 sales would total $410,000 per year. Ingredients would cost 20% of sales. d. Annual operating costs would include $81,000 for salaries, $4,600 for insurance, $38,000 for utilities, and a commission paid to The Yogurt Place, Incorporated, of 13.0% of sales. Required: 1. Prepare a contribution format income statement showing the expected net operating income each year from the franchise. 2-a. Compute the accounting (simple) rate of return promised by the franchise. 2-b. If Mr. Swanson requires an accounting (simple) rate of return of at least 21%, should he acquire the franchise? 3-a. Compute the payback period on this investment. 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. Required 1 Required 2A Required 2B Required 3A Required 3B Prepare a contribution format income statement showing the expected net operating income each year from the franchise. The Yogurt Place, Incorporated Contribution Format Income Statement Variable expenses: Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Incorporated, to dispense frozen yogurt products under The Yogurt Place name. He assembled the following information relating to the franchise: a. A suitable location in a large shopping mall can be rented for $3,800 per month. b. Remodeling and necessary equipment would cost $336,000. The equipment would have a 20-year life and a $16,800 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 sales would total $410,000 per year. Ingredients would cost 20% of sales. d. Annual operating costs would include $81,000 for salaries, $4,600 for insurance, $38,000 for utilities, and a commission paid to The Yogurt Place, Incorporated, of 13.0% of sales. Required: 1. Prepare a contribution format income statement showing the expected net operating income each year from the franchise. 2-a. Compute the accounting (simple) rate of return promised by the franchise. 2-b. If Mr. Swanson requires an accounting (simple) rate of return of at least 21%, should he acquire the franchise? 3-a. Compute the payback period on this investment. 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. Required 1 Required 2A Required 2B Required 3A Required 3B Prepare a contribution format income statement showing the expected net operating income each year from the franchise. The Yogurt Place, Incorporated Contribution Format Income Statement Variable expenses:
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