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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 $3,600 per month. b. Remodeling and necessary equipment would cost $324,000. The equipment would have a 15-year life and a $21,600 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 $390,000 per year. Ingredients would cost 20% of sales. d. Operating costs would include $79,000 per year for salaries, $4,400 per year for Insurance, and $36,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Incorporated, of 12.0% 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 24%, should he acquire the franchise? 3-a. Compute the payback period on the outlet. 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. Req 28 Req 3A Req 38 Prepare a contribution format income statement that shows the expected net operating income each year from the franchise outlet. Req 1 Req 2A Variable expenses Fixed expenses: The Yogurt Place, Incorporated Contribution Format Income Statement

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 $3,600 per month. b. Remodeling and necessary equipment would cost $324,000. The equipment would have a 15-year life and a $21,600 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 $390,000 per year. Ingredients would cost 20% of sales. d. Operating costs would include $79,000 per year for salaries, $4,400 per year for Insurance, and $36,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Incorporated, of 12.0% 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 24%, should he acquire the franchise? 3-a. Compute the payback period on the outlet. 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. Req 28 Req 3A Req 38 Prepare a contribution format income statement that shows the expected net operating income each year from the franchise outlet. Req 1 Req 2A Variable expenses Fixed expenses: The Yogurt Place, Incorporated Contribution Format Income Statement

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Req 2A Req 3A Compute the simple rate of return promised by the outlet. (Round your answer to 1 decimal place.) Simple rate of return Req 1 Show Transcribed Text Req 1 Req 2A Req 2B Show Transcribed Text Req 1 % Req 2B Req 3A Req 3B If Mr. Swanson requires a simple rate of return of at least 24%, should he acquire the franchise? OYes ONO Req 3B Req 1 Req 2A Req 3B Compute the payback period on the outlet. (Round your answer to 1 decimal place.) Payback period years Req 2B 3 Req 3A Req 2A Req 2B Req 3A Req 3B If Mr. Swanson wants a payback of three years or less, will he acquire the franchise? OYes No
Transcribed Image Text:Req 2A Req 3A Compute the simple rate of return promised by the outlet. (Round your answer to 1 decimal place.) Simple rate of return Req 1 Show Transcribed Text Req 1 Req 2A Req 2B Show Transcribed Text Req 1 % Req 2B Req 3A Req 3B If Mr. Swanson requires a simple rate of return of at least 24%, should he acquire the franchise? OYes ONO Req 3B Req 1 Req 2A Req 3B Compute the payback period on the outlet. (Round your answer to 1 decimal place.) Payback period years Req 2B 3 Req 3A Req 2A Req 2B Req 3A Req 3B If Mr. Swanson wants a payback of three years or less, will he acquire the franchise? OYes No
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 $3,600 per month. b. Remodeling and necessary equipment would cost $324,000. The equipment would have a 15-year life and a $21,600 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 $390,000 per year. Ingredients would cost 20% of sales. d. Operating costs would include $79,000 per year for salaries, $4,400 per year for insurance, and $36,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Incorporated, of 12.0% 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 24%, should he acquire the franchise? 3-a. Compute the payback period on the outlet. 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. Req 1 Req 28 Req 3A Req 38 Prepare a contribution format income statement that shows the expected net operating income each year from the franchise outlet. Req 2A Variable expenses: Fixed expenses: The Yogurt Place, Incorporated Contribution Format Income Statement
Transcribed Image Text: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 $3,600 per month. b. Remodeling and necessary equipment would cost $324,000. The equipment would have a 15-year life and a $21,600 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 $390,000 per year. Ingredients would cost 20% of sales. d. Operating costs would include $79,000 per year for salaries, $4,400 per year for insurance, and $36,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Incorporated, of 12.0% 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 24%, should he acquire the franchise? 3-a. Compute the payback period on the outlet. 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. Req 1 Req 28 Req 3A Req 38 Prepare a contribution format income statement that shows the expected net operating income each year from the franchise outlet. Req 2A Variable expenses: Fixed expenses: The Yogurt Place, Incorporated Contribution Format Income Statement
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