What do I do to get net sale, please show work?

timer Asked: Nov 20th, 2013

Question Description

 50 percent (net sales) = $85,000 + 30.5 percent (net sales) Net sales = ?
50 percent (net sales) = $87,000 + 28.2 percent (net sales) Net sales = ?

Here is more info: Assume that you own a sandwich shop. In looking over last year's income statement you see that the annual sales were $250,000 with a gross margin of 50 percent, or $125,000. The fixed operating expenses were $50,000: the variable operating expenses were 20 percent of sales, or $50,000: and your profit was $25,000, or 10 percent of sales. In discussions with your spouse, you wonder if joining a franchise operation such as Subway or Blimpie would improve your results.
Your research has determined that Subway requires a $37,500 licensing fee in addition to an 4-percent royalty on sales and a 4.2-percent advertising fee on sales. Blimpie, while requiring an $35,000 licensing fee, charges only a 6-percent royalty and a 4.5-percent advertising fee. Assuming that you wanted to break-even, what amount of sales would you have to generate with each channel during the first year, since both your fixed and variable expenses would increase?

Remember the break-even point (BEP) is where gross margin equals total operating expenses: in equation form, this is: Gross Margin =Fixed Operating Expenses + Variable Operating Expenses Thus, with Subway, fixed expenses would increase from $50,000 to $87,000 and your variable expenses would increase from 20 percent of sales to 28.2 percent (20 percent + 4 percent + 4.2 percent). Blimpie's would increase fixed expenses by $35,000 and variable expenses by 10.5 percent.

This question has not been answered.

Create a free account to get help with this and any other question!

Brown University

1271 Tutors

California Institute of Technology

2131 Tutors

Carnegie Mellon University

982 Tutors

Columbia University

1256 Tutors

Dartmouth University

2113 Tutors

Emory University

2279 Tutors

Harvard University

599 Tutors

Massachusetts Institute of Technology

2319 Tutors

New York University

1645 Tutors

Notre Dam University

1911 Tutors

Oklahoma University

2122 Tutors

Pennsylvania State University

932 Tutors

Princeton University

1211 Tutors

Stanford University

983 Tutors

University of California

1282 Tutors

Oxford University

123 Tutors

Yale University

2325 Tutors