# Andre has asked you to evaluate his business, Andre's Hair Styling. Planning and budgeting. What is the new contribution margin per haircut? What is the annual break-even point (in number of haircuts)?

Andre has asked you to evaluate his business, Andre's Hair Stylling. Andre has five barbers working for him. (Andre is not one of them.) Each barber is paid $9.90 per hour and works a 40-hour week and a 50-week year, regardless of the number of haircuts. Rent and other fixed expenses are $1,750 per month. Hair shampoo used on all clients is .40 per client. Assume that the only service performed is the giving of haircuts, the unit price of which is $12. Andre has asked you to find the following information.

Find the contribution margin per haircut. Assume that the barbers' compensation is a fixed cost. Show calculations to support your answer.

Determine the annual break-even point, in number of haircuts. Support your answer with an appropriate explanation. Show calculations to support your answer.

What will be the operating income if 20,000 haircuts are performed? Show calculations to support your answer.

Suppose Andre revises the compensation method. The barbers will receive $4 per hour plus $6 for each haircut. What is the new contribution margin per haircut? What is the annual break-even point (in number of haircuts)? Show calculations to support your answer.

© BrainMass Inc. brainmass.com June 3, 2020, 7:05 pm ad1c9bdddfhttps://brainmass.com/business/capital-budgeting/85748

#### Solution Preview

Dear student,

Your solution is provided in a separate Excel file with necessary ...

#### Solution Summary

Your solution is provided in a separate Excel file with necessary calculations and explanation.

The solution is divided in 5 parts as per the requirements of the posted problem and it is supported by necessary explanation of concepts of Break even analysis. Necessary verification of the figures worked out is given at the appropriate places.