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Owner Shan Lo is considering franchising her Noodles by Lo restaurant concept. She believes people will pay $5.00 for a large bowl of noodles. Variable costs are $2.00 per bowl. Lo estimates monthly fixed costs for a franchise at $6,000.

Requirement 1. Use the contribution margin ratio approach to find a franchise's breakeven sales in dollars.

Begin by showing the formula and then entering the amounts to calculate the breakeven point in sales dollars using the contribution margin approach. (Enter a "0" for any zero balances. Abbreviation used: CM = contribution margin.)

Requirement 2.

Lo believes most locations could generate $42,500 in monthly sales. Is franchising a good idea for Lo if franchisees want a minimum monthly operating income of $12,000?

Explain your answer.

Begin by showing the formula and then entering the amounts to calculate the targeted sales dollars required to earn the minimum monthly operating income of $12,000. (Abbreviation used: CM = contribution margin.)

Is franchising a good idea for Lo if franchisees want a minimum monthly operating income of $12,000?

Explain your answer.

Since the predicted monthly sales of $42,500 are _____ the amount of sales necessary to generate a minimum monthly operating income of $12,000, Lo's franchising concept _____

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