Question:
Computing a change in breakeven sales
Owner Yinan Song is considering franchising her Noodles restaurant concept. She believes people will pay $7.50 for a large bowl of noodles. Variable costs are $3.00 per bowl. Song estimates monthly fixed costs for a franchise at $9,000.
Requirements
1. Use the contribution margin ratio approach to find a franchise's breakeven sales in dollars.
2. Song believes most locations could generate $40,000 in monthly sales. Is franchising a good idea for Song if franchisees want a minimum monthly operating income of $13,500?