BYP 20-9

Topics: Contribution margin, Variable cost, Costs Pages: 2 (371 words) Published: May 23, 2014


Information GivenSales Price:26
Fixed Costs (FC):$4,000VC:7.8
Equipment Lease:$1460CM:18.2
$5460Contribution Margin Ratio: 18.2/26=
Members needed to Breakeven:30070%
Monthly Membership Fee:$26

Part A:
Amount of Variable Costs (VC)
Required Sales – Variable Costs – Fixed Costs = Net Income
26(300) – VC(300) – 5460=0
7800 – 300VC – 5460=0
2340 = 300VC7.8 = VC per Unit
Variable Costs: 2340
Part B:
What are the monthly sales in members and dollars with a target net income of $3640?
Required sales in units = (Fixed Costs + Target Net Income)/Contribution Margin per Unit
Required sales in dollars = (FC+TNI)/CM Ratio
(5460+3640)/18.2 = 500 Memberships
(5460+3640)/.70 = $13,000 in Sales

Part C:
Five Examples of Variable Costs for a fitness center:
1. Utilities
2. Repairs/Maintenance
3. Labor Hours
4. Machine Setups
5. Toiletries (Towels, supplies, etc.)

Part D:
To get started owning a Snap Fitness a $65,000 down payment is required. The total investment costs range from $108,000 to $258,500. This cost covers training, site selection assistance, promotional activities and continued support for growth and success. Snap fitness offers 24 hour access 7 days a week, with personal trainers available to lead one-on-one sessions or mini group classes (boot camps). In all, if you have the available finances to cover the start-up costs, Snap Fitness is a great opportunity to become your own boss. The company has put in place many different tools to help the franchisee succeed and continue to succeed.

Owning a Curves franchise is another fitness business that is relatively inexpensive to start-up. Much the same as Snap Fitness, they offer support from the beginning of the process. Starting with an application, an entrepreneur is provided with support in selecting the best financing options, location selection and promotional activities. The financial...
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