Write a paper of no more than 1000 words responding to the

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Reference no: EM13351421

Write a paper of no more than 1000 words responding to the questions below Format the paper and presentation consistent with APA guidelines.

CASE STUDY

Many of you will someday own your own business. One rapidly rising opportunity is no-frills workout centers. Such centers attract customers who want to take benefit of state-of-the-art fitness equipment but do not need the other amenities of full-service health clubs. One way to own your own fitness business is to purchase a franchise. Snap Fitness is a Minnesota-based business that offers franchise opportunities. For a very low monthly fee ($26, without an annual contract) customers will access a Snap Fitness center 24 hours a day.
The Snap Fitness website shows that start-up costs range from $60,000 to $184,000. This initial investment covers the subsequent pre-opening costs: franchise fee, leasehold improvements, grand opening marketing, utility/rent deposits, and training.

QUESTIONS:

(a) Assume that Snap Fitness estimates that each location incurs $4,000 per month in fixed operating expenses plus $2,000 to lease equipment. A current newspaper article describing no-frills fitness centers indicated that a Snap Fitness site might need only 300 members to break even. Using the information provided above, and your knowledge of CVP analysis, estimates the amount of variable costs. (When performing your analysis, suppose that the only fixed costs are the estimated monthly operating expenses and the equipment lease.)

(b) Using the information from part (a), what would monthly sales in members and dollars have to be to get a target net income of $10,000 for the month?

Reference no: EM13351421

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