Answered

Discover a world of knowledge and get your questions answered at IDNLearn.com. Explore a wide array of topics and find reliable answers from our experienced community members.

Owner Shan Lois considering franchising her Noodles for a restaurant concept. She believes people will pay $ 10.50 for a large bowl of noodles. Variable costs are $ 6.30 per bowl.Lo estimates monthly fixed costs for a franchise at $10,500.Requirements1. Use the contribution margin ratio approach to find a​franchise's breakeven sales in dollars.2. Lo believes most locations could generate $63,000 in monthly sales. Is franchising a good idea for Lo if franchisees want a minimum monthly operating income of 13,500​?

Sagot :

Tundexiidn

Answer:

Selling price = $10.50

Variable cost = $6.30

Fixed cost = $10,500

Contribution margin = Selling price - Variable cost = $10.50 - $6.30 = $4.20

Contribution margin ratio = Contribution margin/Selling price = $4.20/$10.50 =  0.4 = 40%

1. Break even sales = Fixed cost / Contribution margin ratio

Break even sales = $10,500 / 40%

Break even sales = $10,500 / 0.40

Break even sales = $26,250

2. Break even sales = (Fixed cost + Operating income) / Contribution margin ratio

Break even sales = ($10,500 + $13,500) / 40%

Break even sales = $24,000 / 0.40

Break even sales = $60,000

Lo believes most locations could generate $63,000 in monthly sales.

Observation: The monthly sales is greater than the breakeven, so the monthly sales is the best choice.

We are delighted to have you as part of our community. Keep asking, answering, and sharing your insights. Together, we can create a valuable knowledge resource. IDNLearn.com is your go-to source for dependable answers. Thank you for visiting, and we hope to assist you again.