Today, people are focused on living and eating for a healthier lifestyle. One of the fastest growing businesses in the United States is the health industry. Business owners are investing and purchasing fitness franchises that offer low-cost membership as well as convenient hours. Snap Fitness is one of those franchises that have over 1,400 locations worldwide. One of the reasons that Snap Fitness would be beneficial to invest in and also to purchase is because it is a growing industry. “Economically, the health club industry has proven to be recession-proof, as health-minded consumers continue to look for a high-quality workout solution that provides the best value for their buck.” (Snap Fitness, 2015) Snap Fitness provides an in-house…show more content… The CVP deals with how the changes in fixed costs, variable costs, and the selling price (per unit) for Snap Fitness affect the operating profit. CVP makes the supposition that all costs are either fixed or variable. The CVP presumes the fixed costs, the variable costs, and the sales price per unit are constant too. Additionally the CVP theorizes the selling of all products produced. The basic formula used in CVP is: price per unit multiplied by the entire number of units produced and sold is equal to variable costs per unit multiplied by the quantity of units sold and produced plus the fixed cost plus profit. The contribution margin is the amount that sales exceed variable costs. The unit contribution margin ratio is the amount that sales excess sales per unit minus the variable cost per unit.
With Snap Fitness, the fixed expenses are $6,000. The company must sell 300 memberships at $26 each to meet the break-even point. The calculation is 300 times $26. The total of the company’s costs is then $7,800 for a month. The costs, minus the fixed costs give the result of the variable costs per month of $1800. With such information, a table can represent the calculations mentioned that includes the information from Snap Fitness. Table 1 shows the CVP analysis for Snap Fitness, including the Contribution margin, variable cost, and other relevant data necessary.
With the CVP