Contribution margin, break-even and margin of safety
Not what you're looking for?
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.
Purchase this Solution
Solution Summary
Contribution margin, break-even and margin of safety calculations done.
Solution Preview
Please see the attached file:
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 ...
Purchase this Solution
Free BrainMass Quizzes
Organizational Behavior (OB)
The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.
Understanding the Accounting Equation
These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.
Introduction to Finance
This quiz test introductory finance topics.
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.
IPOs
This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)