Snap Fitness Paper
Omar Nicholas, Rayshaun Sturgis, Sasha Avila, Mujibar Badal
Group ID: GA12MBA07
Snap Fitness Paper
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
Copyright © 2009 John Wiley & Sons 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.)
* A Snap Fitness franchise is estimated to incur fixed operating costs of $4,000 and $2,000 to lease fitness equipment. A newspaper article providing details about fitness centers like Snap Fitness states this form of business may only require 300 members to reach its break-even point. The cost-volume-profit, also known as CVP, analysis will assist Snap Fitness in determining the effects of changes of volume and costs on the business’ profits. The CVP analysis will help the new franchise apply appropriate profit planning. The CVP analysis determines profit by subtracting total revenue from total costs. The equation separates costs into variable and fixed. The equation coverts to profit = total revenue - total variable costs - total fixed costs. The newspaper stated the average break-even point would be 300 members and each member pays a $26 monthly fee to attend a Snap Fitness center. The break-even point in dollars would be $7,800. With a minimum of 300 members the total revenue for the month is $7,800. The business has estimated total fixed costs of $6,000. To estimate the amount of variable costs Snap Fitness will incur the business must apply the CVP basic equation (Kimmel, Weygandt, & Kieso, 2009)....