Subway, the fast food restaurant franchise, recently announced it is bringing back the "$5 Footlong" promotion. Hundreds of Subway franchise owners are protesting the promotion, saying that they cannot afford to sell the footlong sub sandwiches for $5. Assume that the costs related to a Subway footlong and a Subway franchisee include the following: Cost per Cost item Details sandwich Food ingredients Per footlong $ 2.00 Labor $14.00/hour wage rate, Labor cost per footlong each worker can make 7 2.00 sandwiches per hour Credit card transaction fee 1.0% + $0.10 per transaction 0.15 $360 per month divided by 4,000 0.09 Electricity orders per month Rent $1,200 per month divided by 0.30 Rent 4,000 orders per month Franchise and startup fees $36,000 divided by 180 months 0.05 Franchise fee amortization (15 years) divided by 4,000 orders per month 0.40 Royalty fee 8.0% of sales

Subway, the fast food restaurant franchise, recently announced it is bringing back the "$5 Footlong" promotion. Hundreds of Subway franchise owners are protesting the promotion, saying that they cannot afford to sell the footlong sub sandwiches for $5. Assume that the costs related to a Subway footlong and a Subway franchisee include the following: Cost per Cost item Details sandwich Food ingredients Per footlong $ 2.00 Labor $14.00/hour wage rate, Labor cost per footlong each worker can make 7 2.00 sandwiches per hour Credit card transaction fee 1.0% + $0.10 per transaction 0.15 $360 per month divided by 4,000 0.09 Electricity orders per month Rent $1,200 per month divided by 0.30 Rent 4,000 orders per month Franchise and startup fees $36,000 divided by 180 months 0.05 Franchise fee amortization (15 years) divided by 4,000 orders per month 0.40 Royalty fee 8.0% of sales

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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