A4 Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Incorporated, to dispense frozen yogurt productsunder 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 $3,500 per month.b. Remodeling and necessary equipment would cost $270,000. The equipment would have a 15-year life and an $18,000 salvagevalue. 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 $300,000 per year. Ingredients would cost 20% ofsales.d. Operating costs would include $70,000 per year for salaries, $3,500 per year for insurance, and $27,000 per year for utilities. Inaddition, Mr. Swanson would have to pay a commission to The Yogurt Place, Incorporated, of 12.5% 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 12%, should he acquire the franchise?3-a. Compute the payback period on the outlet.3-b. If Mr. Swanson wants a payback of four years or less, will he acquire the franchise?Complete this question by entering your answers in the tabs below.Req 1Req 2AVariable expenses:Fixed expenses:Req 2BReq 3APrepare a contribution format income statement that shows the expected net operating income each year from the franchiseoutlet.The Yogurt Place, IncorporatedContribution Format Income StatementReq 3B00

A contribution margin income statement is an income statement that displays the contribution margin…

Answered: Paul Swanson has an opportunity to…

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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Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Ic., 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 $2,800 per month. b. Remodeling and necessary equipment would cost $276,000. The equipment would have a 20-year life and a $13,800 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 $310,000 per year. Ingredients would cost 20% of sales. d. Operating costs would include $71,000 per year for salaries, $3,600 per year for insurance, and $28,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Inc., of 13.0% of sales.
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 suitable location in a large shopping mall can be rented for $3,200 per month. Remodeling and necessary equipment would cost $300,000. The equipment would have a 20-year life and a $15,000 salvage value. Straight-line depreciation would be used, and the salvage value would be considered in computing depreciation. Based on similar outlets elsewhere, Mr. Swanson estimates that sales would total $350,000 per year. Ingredients would cost 20% of sales. Operating costs would include $75,000 per year for salaries, $4,000 per year for insurance, and $32,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Incorporated, of 15.0% of sales. Required: 1. Prepare a contribution format income statement that…
Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Inc., to dispense frozenyogurt products under The Yogurt Place name. Mr. Swanson has assembled the following informationrelating to the franchise:a. A suitable location in a large shopping mall can be rented for $3,500 per month.b. Remodeling and necessary equipment would cost $270,000. The equipment would have a 15-yearlife and an $18,000 salvage value. Straight-line depreciation would be used, and the salvage valuewould be considered in computing depreciation.c. Based on similar outlets elsewhere, Mr. Swanson estimates that sales would total $300,000 per year.Ingredients would cost 20% of sales.d. Operating costs would include $70,000 per year for salaries, $3,500 per year for insurance, and$27,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to TheYogurt Place, Inc., of 12.5% of sales.Required:(Ignore income taxes.)1. Prepare a contribution format income statement that…
Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Inc., to dispense frozen yogurt products under The Yogurt Place name. Mr. Swanson has assembled the following information relating to the franchise: A suitable location in a large shopping mall can be rented for $4,300 per month. Remodeling and necessary equipment would cost $366,000. The equipment would have a 20-year life and a $18,300 salvage value. Straight-line depreciation would be used, and the salvage value would be considered in computing depreciation. Based on similar outlets elsewhere, Mr. Swanson estimates that sales would total $460,000 per year. Ingredients would cost 20% of sales. Operating costs would include $86,000 per year for salaries, $5,100 per year for insurance, and $43,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Inc., of 12.0% of sales. Required: 1. Prepare a contribution format income statement that shows the expected…
Joe Swanson has an opportunity to acquire a franchise from The Yogurt Place, Inc. to dispense frozen yogurt products under the name The Yogurt Place. Swanson has assembled the following information relating to the franchise: a. A suitable location in a large shopping mall can be rented for $5,480 per month. b. Remodelling and necessary equipment would cost $337,500. The equipment would have a 15-year life and an $10,500 salvage value. Straight-line depreciation would be used. c. On the basis of similar outlets elsewhere, Swanson estimated that sales would total $440,000 per year. Ingredients would cost 20% of sales. d. Operating costs would include $143,500 per year for salaries, $5,600 per year for insurance, and $30,500 per year for utilities. In addition, Swanson would have to pay a commission to The Yogurt Place of 12.5% of sales. Required: 1. Prepare a contribution format income statement that shows the expected net operating income each year from the franchise outlet. Deduct:…
Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Inc., to dispense frozen yogurt products under The Yogurt Place name. Mr. Swanson has assembled the following information relating to the franchise: A suitable location in a large shopping mall can be rented for $3,500 per month. Remodeling and necessary equipment would cost $318,000. The equipment would have a 20-year life and a $15,900 salvage value. Straight-line depreciation would be used, and the salvage value would be considered in computing depreciation. Based on similar outlets elsewhere, Mr. Swanson estimates that sales would total $380,000 per year. Ingredients would cost 20% of sales. Operating costs would include $78,000 per year for salaries, $4,300 per year for insurance, and $35,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Inc., of 11.5% of sales. Required: 1. Prepare a contribution format income statement that shows the expected…
Paul Swanson has an opportunity to acquire a franchise from The Yogurt Place, Inc., to dispense frozen yogurt products under The Yogurt Place name. Mr. Swanson has assembled the following information relating to the franchise: A suitable location in a large shopping mall can be rented for $3,500 per month. Remodeling and necessary equipment would cost $318,000. The equipment would have a 20-year life and a $15,900 salvage value. Straight-line depreciation would be used, and the salvage value would be considered in computing depreciation. Based on similar outlets elsewhere, Mr. Swanson estimates that sales would total $380,000 per year. Ingredients would cost 20% of sales. Operating costs would include $78,000 per year for salaries, $4,300 per year for insurance, and $35,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Inc., of 11.5% of sales. Required: 1. Prepare a contribution format income statement that shows the expected net…
es 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 $4,400 per month. b. Remodeling and necessary equipment would cost $372,000. The equipment would have a 10-year life and a $37,200 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 $470,000 per year. Ingredients would cost 20% of sales. d. Operating costs would include $87,000 per year for salaries, $5,200 per year for insurance, and $44,000 per year for utilities. In addition, Mr. Swanson would have to pay a commission to The Yogurt Place, Incorporated, of 12.5% of sales. Required: 1. Prepare a contribution format income…
Dunn Inc. owns and operates a number of hardware stores in the New England region. Recently, the company has decided to locate another store in a rapidly growing area of Maryland. The company is trying to decide whether to purchase or lease the building and related facilities. Purchase: The company can purchase the site, construct the building, and purchase all store fixtures. The cost would be $1,850,000. An immediate down payment of $400,000 is required, and the remaining $1,450,000 would be paid off over 5 years at $350,000 per year (including interest payments made at end of year). The property is expected to have a useful life of 12 years, and then it will be sold for $500,000. As the owner of the property, the company will have the following out-of-pocket expenses each period. Property taxes (to be paid at the end of each year) $40,000 Insurance (to be paid at the beginning of each year) 27,000 Other (primarily maintenance which occurs at the end of each year) 16,000…
Your manager has asked you to advise your client Kofi Gyato, owner and director of Kofi Gyato Limited, on the implications of the proposed transaction.Your client has identified an opportunity to develop his business by manufacturing the products which he sells. To do this he would need to buy a machine which will have an expected life of ten years. He has received this quotation for the machine.GHȼPrice of machine70,000Delivery and installation3,500Commissioning costs1,500Annual maintenance costs3,500Required:Prepare a report to your client. Your report should:(a) Explain the difference between capital and revenue expenditure, and how each type of expenditure affects the accounts of a business.(b) Indicate which of the costs of the machine should be considered as capital cost and which should be considered as revenue cost.(c) Define depreciation and explain how the accounting entries for depreciation affect each element of the accounting equation.(d) Indicate:(i) What the annual…
Bill Braddock is considering opening a Fast 'n Clean Car Service Center. He estimates that the following costs will be incurred during his first year of operations: Rent $8,800, Depreciation on equipment $7,000, Wages $16,400, Motor oil $12.00 per oil change. Oil filters will cost $5.00 per oil change. He must also pay The Fast 'n Clean Corporation a franchise fee of $1.20 per oil change, since he will operate the business as a franchise. In addition, utility costs are expected to behave in relation to the number of oil changes as follows: Number of Oil Changes Instructions 4,000 6,000 9,000 12,000 14,000 Format answers with $ signs, commas, or % when appropriate. (a) Using the high-low method, determine variable costs per unit $15,000 Bill Braddock anticipates that he can provide the oil change service with a filter at $25 each. for the utility costs. Utility Costs lyr $7,000 $ 8,300 $ 10,600 $13,000 and fixed costs
McCormick & Company is considering building a new factory in Largo, Maryland. James Francis, a landowner, is selling a 4.35-acre parcel of industrial zoned land with a listed sale price of $3,000,000.00 for the land. McCormick & Company is interested in the land and so is another manufacturing company. The competing manufacturing company has made an offer of $2,300,000.00 in cash and $300,000 each year for 15 years for the land. McCormick & Company knows it can make an offer to outbid the competitor to obtain the land. So, McCormick & Company decided to offer $4,424,000.00 in cash. Now, the land owner, James Francis, must make a decision between the two competing offers. To make this decision, James should first identify the Present Value (PV) of each offer. James's bank is offering a 12 percent (12%) interest rate if the competing manufacturing company borrows money to pay its annual payment. Let's help James make his decision by answering the following questions using…

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