Andre has 5 barbers working for him (Andre is not 1 of them). Each barber is pai
ID: 2502618 • Letter: A
Question
Andre has 5 barbers working for him (Andre is not 1 of them). Each barber is paid $9.90 per hour and works a 40 hour work week, and a 50 week year, regardless of the number of haircuts. Rent and other fixed expenses are $1750 per month. Hair shampoo used on clients is .40 cent per client. Assume the only service performed is haircuts (including shampoo), the unit price is $12.00 dollars.
Find the cotribution margin per haircut? Assume the barbers contribution is a fixed cost. Show calculations to support your answer.
Explanation / Answer
Andre has 5 barbers working for him (Andre is not 1 of them). Each barber is paid $9.90 per hour and works a 40 hour work week, and a 50 week year, regardless of the number of haircuts. Rent and other fixed expenses are $1750 per month. Hair shampoo used on clients is .40 cent per client. Assume the only service performed is haircuts (including shampoo), the unit price is $12.00 dollars.
Find the cotribution margin per haircut? Assume the barbers contribution is a fixed cost. Show calculations to support your answer.
Answer:
Cotribution margin per haircut = The unit price - Variable Cost
Cotribution margin per haircut = 12 - 0.40
Cotribution margin per haircut = $11.60
Other Calculation:
Variable Cost = Hair shampoo used on clients
Variable Cost =$ 0.40
Barber Cost = 9.90*40*50*5 = $ 99000
Total Annual Fixed Cost = Rent and other fixed expenses + Barber Cost
Total Annual Fixed Cost = 1750*12 + 99000
Total Annual Fixed Cost = $ 120000
Break Even Point ( no of Hair cut) = Total Annual Fixed Cost/Cotribution margin per haircut
Break Even Point ( no of Hair cut) = $ 120000/11.60
Break Even Point ( no of Hair cut) = 10344.83 Hair cut
Break Even Point ( no of Hair cut) = 10345 Hair cut