Computing a change in breakeven salesOwner Shan Mu is considering franchising her Noodles by Mu restaurant concept. She believes people will pay $10.00 for a large bowl of noodles. Variable costs are $5.00 per bowl. Mu estimates monthly fixed costs for a franchise at $9,000.RequirementsUse the contribution margin ratio approach to find a franchise’s breakeven sales in dollars.Mu believes most locations could generate $61,500 in monthly sales. Is franchising a good idea for Mu if franchisees want a minimum monthly operating income of $21,000? Explain your answer.

1. Contribution Margin per unit = Sales price per unit - variable cost per unit = $10-$5 = $5…

Answered: Computing a change in breakeven sales…

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Computing a change in breakeven sales

Owner Shan Mu is considering franchising her Noodles by Mu restaurant concept. She believes people will pay $10.00 for a large bowl of noodles. Variable costs are $5.00 per bowl. Mu estimates monthly fixed costs for a franchise at $9,000.

Requirements

Use the contribution margin ratio approach to find a franchise’s breakeven sales in dollars.
Mu believes most locations could generate $61,500 in monthly sales. Is franchising a good idea for Mu if franchisees want a minimum monthly operating income of $21,000? Explain your answer.

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