# Contribution margin, break-even and margin of safety

In the month of June, Paula's Beauty Salon gave 3,500 haircuts, shampoos, and permanents at an average price of $30. During the month, fixed costs were $16,800 and variable costs were 80% of sales.

1. Determine the contibution margin in dollars, per unit and as a ratio.

2. Using the contribution margin technique, compute the break-even point in dollars and in units.

3. Compute the margin of safety in dollars and as a ratio.

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In the month of June, Paula's Beauty Salon gave 3,500 haircuts, shampoos, and permanents at an average price of $30. During the month, fixed costs were $16,800 and variable costs were 80% of sales.

1. Determine the contibution margin in dollars per unit and as a ratio

Variable cost ratio= 80%

Current Units = 3,500

Selling Price= $30 per unit

Variable cost= $24 per unit =$30. x 80.%

Fixed Cost= $16,800

Contribution Margin per unit

Contribution margin per unit = Selling price per unit - variable cost per unit

Selling Price= $30 per unit

Variable cost= $24 per unit

Therefore Contribution margin per unit= $6 per unit =$30.-$24.

Contribution margin per unit= $6 ...

#### Solution Summary

Contribution margin, break-even and margin of safety calculations done.