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è Take a Test-harris atz-Internet Explore https/ww PlayerTest.aspa bestid- 174 ACCT 2210 02 Prin of Acct 2 (Fall 17) harms atz 12/19/17 1100 Test: ACCT 2210 02 FINAL EXAM Time Remaining: 01 27 02 Submit This Question: 20 pts 21 or 23 (3 complete) This Test: 100 pts pos Owner Shit Low is considering franchising her 30 per bowl Low estimates meethly fixed costs Sot a hanchiseS10.500 Noodles by Low restaurant concept. She believes people will pay $10 50 for a large bowl of noodes Varlable costs Read the Requirement 1. Use the connibution mangin raio appreach to Snd a franchise's breakeven sales in dollars 1 Begin by showing the formula and then entering the amounts to caloulake the breakeven point in sales dolars using the contribution margin approach (Entor a "for any zero bdances Abtreviston used CM . oombkn mann ) renLCMReqred sales in delars C10500 Requirement 2. Low beloves mest locations could generate $94 00 in monthly sales le operating income of $22.500 franchising a good idea for Low if hanchisees want a minimum monthy Begin by showing te formuda and then entering the amounts to calculate the tageted sales dolters required toeam the minmam 1050022500 Is franchining a good idea for Low if ranchiboos wanta miimom montly operating income of $22 5007 han the anount ot sales necessary to genee a minimum monthly operating income of $22,500, Low's a good idea o At Choose from any list or enlet any sumber o the irput telds and ten contoue to the nest question Mastered Leaning 21 3 Use cost wam corporate kohis comvinvestorslinancial intomaton ne nobo that for permisnions reasons, we cannot link directly to those pages Please copy and paste URL into yeur browser address bar to aocess the reports.Explanation / Answer
Answer 1.
Contribution Margin Ratio = (Selling Price - Variable Cost per unit) / Selling Price
Contribution Margin Ratio = ($10.50 - $6.30) / $10.50
Contribution Margin Ratio = 0.40 = 40%
Required Sales in dollars = (Fixed Costs + Target Profit) / Contribution Margin Ratio
Required Sales in dollars = ($10,500 + $0) / 0.40
Required Sales in dollars = $26,250
Answer 2.
Required Sales in dollars = (Fixed Costs + Target Profit) / Contribution Margin Ratio
Required Sales in dollars = ($10,500 + $22,500) / 0.40
Required Sales in dollars = $82,500
Since the predicted monthly sales of $94,000 are greater than the amount of sale necessary to generate a minimum monthly operating income of $22,500. Low’s franchising concept is a good idea.
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