MIS 3210 Homework W9 Pro-forma income statement Remember Alex McMann from the At

Question

MIS 3210 Homework W9 Pro-forma income statement Remember Alex McMann from the Athlete's Foot shoe store? Well there is this large store that went out of business located in the same shopping center as Alex's storeThe store has been closed for some time and the space has not been rented to anyone new. Alex has an idea. He will lease that store space and open a large fitness center. That will attract people to the shopping center which may lead to an increase in walk-in traffic at his shoe store. Should he do it? There's not any really any way to know for certain whether the fitness center will be a profitable business. Therefore, we cannot make an informed decision at this point. We need to generate information from the data that we have so far, to acquire the knowledge to make a better-informed decision. We will start by creating a pro-forma income statement similar to the one that Patty created for her pie store. Here are Alex's estimated expenses (per year): Per Year Fixed Expenses: Lease on building Utilities Equipment Lease Liability Insurance Other Overhead Expenses $80,000 $10,000 $8,000 $5,000 $2,000 Per Every 100 members Variable Expenses: Trainers Salary Floor Staff Salary $30,000 $20,000 Here are Alex's projected number of fitness center members: Worse Case: Most likely Case: Best Case: 800 Worse eCase:1200 1,000 1,200 Using Excel and Alex's estimated expenses and forecasted memberships, create a pro- forma income statement. Assume that Alex will charge $50/month for a membership.

Explanation / Answer

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Proforma Income Statement for Proposed Fitness Center -first year of operation Per Unit Worst Case Most Likely Case Best Case Projected Members 800 1000 1200 Revenues                      Per member $600 TotalRevenue: $480,000 $600,000 $720,000 Expenses     Variable Expenses(per 100 members)                        Trainers Salary $30,000 $240,000 $300,000 $360,000                        Floor Staff Sallary $20,000 $160,000 $200,000 $240,000 Fixed Expenses(per year)                        Lease on building $80,000                        Utilities $10,000                        Equipment Lease $8,000                        Liability Insurance $5,000                      Other Overhead Expenses $2,000 Total Expenses $505,000 $605,000 $705,000 Estimated Net Income(profit) ($25,000) ($5,000) $15,000

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