Share
Explore BrainMass

Planning & Budgeting for Andy Barber

Andy has five barbers working for him. Each Barber is paid $9.90/hr & works 40/hr week & a 50/wk year regardless of # of haircuts. Rent & other fixed expenses are $1750 per month. Hair shampoo used on all clients costs .40 per client. Assuming they are on ly doing haircuts the unit price is $12.

1 Find contribution margin per haircut. Assume the barbers' compensation is a fixed cost
Show calculation please.
2 Determine break even point (annual) in number of haircuts. Show calculation and statement.
3 What will be the operating income if 20,000 haircuts are performed? show calculations.
4 - If Barber revises compensation & the barbers will receive $4 per hour plus $6 for each haircut.

What is the new contribution margin per haircut? annual break even point in number of haircuts?

Solution Preview

1 Find contribution margin per haircut. Assume the barbers' compensation is a fixed cost
Show calculation please.

Contribution margin per haircut = Unit price - Variable cost per client
= 12 - 0.40
= 11.60 per client

2 Determine break even point (annual) in number of haircuts. Show calculation and statement.

First, we need to determine the cost of each barber as follows: -
$9.90 per hour x 40 hour per week x 50 weeks per year = ...

Solution Summary

This solution is comprised of a detailed explanation and calculation to find the break even point and operating income for Andy Barber.

$2.19