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

See similar textbooks

Similar questions

Reuben's Deli currently makes rolls for deli sandwiches it produces. It uses 30,000 rolls annually in the production of deli sandwiches. The costs to make the rolls are: Costs Reuben's Deli cost data Amounts Materials Labor Variable overhead Fixed overhead Increments $0.24 per roll 0.40 per roll 0.16 per roll 0.20 per roll A potential supplier has offered to sell Reuben the rolls for $0.90 each. If the rolls are purchased, 30% of the fixed overhead could be avoided. If Reuben accepts the offer, what will the effect on profit be?
St.Ivory Hospital has been hit with a number of complaints about its food service from patients, employees as well as cafeteria customers. These complaints, coupled with a very tight local labor market, have prompted the organization to contact FINS about the possibility of an outsourcing arrangement. The hospital's business office has provided the following information for food service for the year just ended: food costs - $890,000; labor - $85,000; variable overhead - $35,000; allocated fixed overhead - $60,000; and cafeteria net income - $80,000. Conversations with FINS personnel revealed the following information: • FINS will charge St. Ivory Hospital $14 per day for each patient served. Note: This figure has been "marked up" by FINS to reflect the firm's cost of operating the hospital cafeteria. • St. Ivory's 250-bed facility operates throughout the year and typically has an average occupancy rate of 70%. • Labour is the primary driver for variable overhead. If an outsourcing…
Reuben's Deli currently makes rolls for deli sandwiches it produces. It uses 31,000 rolls annually in the production of deli sandwiches. The costs to make the rolls are: Materials $0.24 per roll Labor 0.39 per roll Variable overhead 0.16 per roll Fixed overhead 0.20 per roll A potential supplier has offered to sell Reuben the rolls for $0.89 each. If the rolls are purchased, 30% of the fixed overhead could be avoided. If Reuben accepts the offer, what will the effect on profit be? decline in profit if he buys the rolls. Reuben would see a $
Extreme Sports sells logo sports merchandise. The company is contemplating whether or not to continue its custom embroidery service. All of the company's direct fixed costs can be avoided if a segment is dropped. The information is available for the segments. Custom Logo Embroidery Apparel Sales $60,000 $250,000 Variable costs 29,000 111,000 Contribution margin $31,000 $139,000 Direct fixed costs 22,000 41,000 Allocated common fixed costs 12,000 50,000 Net income $(3,000) $48,000 A. What will be the impact on net income if the embroidery segment is dropped? Net income $ B. Assume that if the embroidery segment is dropped, apparel sales will increase 10%. What is the impact on the contribution margin and net income solely for the apparel? Contribution margin $ Net income $4 C. Identify one cost that is not relevant in this analysis.
The Farm House restaurant makes their own bread to serve in their restaurant. They have been approached by a local bakery offering to make the bread for them. The restaurant has two choices:1) continue making the bread in-house, or 2) buy it from the local bakery.The Farm House head chef estimated the variable cost of making each loaf of bread to include the following:Sales prices and variable costs are as follows: $0.69 of ingredients, $0.25 of variable overhead, and direct labor costs to knead and form the loaves of $0.70. Allocating fixed overhead is based on direct labor. The Farm House assigns a fixed overhead cost of $1.07 per loaf. None of the fixed costs are avoidable. The local bakery would charge $1.75 per loaf.1. What is the full product unit cost of making bread in-house?The Farm House Direct Materials Direct Labor Variable manufacturing overhead Fixed manufacturing overhead Cost per loaf of bread 2. Should the restaurant bake the bread…
Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well as offering take-out and free home delivery services. The pizzeria’s owner has determined that the shop has two major cost drivers—the number of pizzas sold and the number of deliveries made. The pizzeria’s cost formulas appear below: Fixed Cost per Month Cost per Pizza Cost per Delivery Pizza ingredients $ 4.60 Kitchen staff $ 5,950 Utilities $ 630 $ 0.50 Delivery person $ 3.30 Delivery vehicle $ 650 $ 1.70 Equipment depreciation $ 416 Rent $ 1,910 Miscellaneous $ 750 $ 0.25 In November, the pizzeria budgeted for 1,620 pizzas at an average selling price of $17 per pizza and for 240 deliveries. Data concerning the pizzeria’s actual results in November appear below: Actual Results Pizzas 1,720 Deliveries 220 Revenue $ 29,810 Pizza ingredients $ 7,570 Kitchen staff $ 5,890 Utilities $ 895 Delivery person $ 726…
Supreme Furniture needs to purchase glass panes to make glass top coffee tables. Last year Supreme Furniture has two suppliers, Bobux and Twinkle, with the following supplier related information: Cost per unit of Number of activities Number of activities activity driver for Bobux Supplier related activities Returning poor quality glass panes $120 per pane 25 panes Processing purchase orders Receiving and inspecting deliveries S50 per delivery 15 deliveries Supplier audit Rework due to poor quality glass $100 per table 60 tables Purchase price per glass pane for Twinkle 12 panes 40 orders 15 deliveries 2 audits 15 tables $150 780 $20 per order 12 orders $1000 per audit 5 audits $100 Number of glass panes purchased 446 Calculate the supplier performance index of Bobux (round your answer to 2 decimal places). Answer.
How much does a bowl of chili cost on a full-cost basis? An out-of-pocket basis? For determining the true profitability of chili, how much does a bowl of chili really cost?
Extreme Sports sells logo sports merchandise. The company is contemplating whether or not to continue its custom embroidery service. All of the company's direct fixed costs can be avoided if a segment is dropped. The information is available for the segments. Custom Logo Embroidery Apparel Sales $59,000 $250,000 Variable costs 30,000 109,000 Contribution margin $29,000 $141,000 Direct fixed costs 22,000 39,000 Allocated common fixed costs 12,000 50,000 Net income $(5,000) $52,000 A. What will be the impact on net income if the embroidery segment is dropped? Net income $ Decrease B. Assume that if the embroidery segment is dropped, apparel sales will increase 10%. What is the impact on the contribution margin and net income solely for the apparel? Contribution margin $ Increase Net income Increase C. Identify one cost that is not relevant in this analysis. Common fixed costs
Use CVP and compute the food covers necessary to achieve break even for a single product restaurant with total fixed cost of $ 16,000, an average check of $ 15, and a variable cost per cover of $. 7.
1000
Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well as offering take-out and free home delivery services. The pizzeria’s owner has determined that the shop has two major cost drivers—the number of pizzas sold and the number of deliveries made. The pizzeria’s cost formulas appear below: Fixed Costper Month Cost perPizza Cost perDelivery Pizza ingredients $ 4.40 Kitchen staff $ 5,910 Utilities $ 610 $ 0.30 Delivery person $ 3.10 Delivery vehicle $ 630 $ 1.50 Equipment depreciation $ 400 Rent $ 1,870 Miscellaneous $ 730 $ 0.15 In November, the pizzeria budgeted for 1,560 pizzas at an average selling price of $15 per pizza and for 220 deliveries. Data concerning the pizzeria’s actual results in November appear below: Actual Results Pizzas 1,660 Deliveries 200 Revenue $ 25,450 Pizza…