ACCTG 561 – Week 5 LT Assignment

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

Format the paper and presentation consistent with APA guidelines.

In addition to the questions being answered there should be a intro and conclusion. 

CASE STUDY BYP19-7:

Many of you will someday own your own business. One rapidly growing
opportunity is no-frills workout centers. Such centers attract customers who want to take
advantage of state-of-the-art fitness equipment but do not need the other amenities of fullservice
health clubs. One way to own your own fitness business is to buy 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 can access a Snap Fitness
center 24 hours a day.

The Snap Fitness website (www.snapfitness.com) indicates that start-up costs range
from $60,000 to $184,000. This initial investment covers the following pre-opening costs:
franchise fee, grand opening marketing, leasehold improvements, utility/rent deposits,
and training.

QUESTIONS:

(a) Suppose that Snap Fitness estimates that each location incurs $4,000 per month in
fixed operating expenses plus $2,000 to lease equipment. A recent newspaper article
describing no-frills fitness centers indicated that a Snap Fitness site might require
only 300 members to break even. Using the information provided above, and your
knowledge of CVP analysis, estimate the amount of variable costs. (When performing
your analysis, assume 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 achieve a target net income of $10,000 for the month?