BYP20-9 Quiz

BYP20-9

Information Given Sales Price: 26 Fixed Costs (FC): $4,000 VC: 7.8 Equipment Lease: $1460 CM: 18.2 $5460 Contribution Margin Ratio: 18.2/26= Members needed to Breakeven: 300 70% 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 = 300VC 7.8 = 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 requirements are $15-45,000 in liquid capital and a minimum net worth of $75,000. The startup costs are as low as $39,900 and include the franchise ownership, equipment (excluding shipping costs) and training. This particular fitness center has the ability to provide service in small areas helping to keep fixed costs down while being convenient and affordable. Another benefit to this Franchise is the ability to cater to the clientele. Curves is providing fitness activities as well as meal replacement bars, accessories and apparel. There is a multiproduct mix, which provides multiple ways to benefit the customer. With the multiple products and proven success in the industry, Curves is a smart start-up.