(L. OBJ. 3) Computing a change in breakeven sales [10-15 min]
Owner Shan Lo is considering franchising her Noodles restaurant concept. She believes people will pay $8 for a large bowl of noodles. Variable costs are $1.60 per bowl. Lo estimates monthly fixed costs for a franchise at $8,600.
Requirements
1. Use the contribution margin ratio approach to find a franchise’s breakeven sales in dollars.
2. Lo believes most locations could generate $22,313 in monthly sales. Is franchising a good idea for Lo if franchisees want a minimum monthly operating income of $8,850?
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