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Andre has asked you to assess his business, Andre's Hair Styling. Andre has 5 barbers working for him. (Andre is not one of them.) Each barber is paid $9.90 per hr and works a 40-hr week and a 50-week year, in spite of of the number of haircuts. Rent and other fixed expenditures are $1,750 per month. Hair shampoo used on all clients is .40 per client. Suppose that the only service performed is the giving of haircuts (comprising shampoo), the unit price of which is $12. Andre has asked you to find out the given information.

1) Find out the contribution margin per haircut. Suppose that the barber's compensation is a fixed cost. Show computations to support your answer.

2) Find out the annual break-even point, in number of haircuts. Support your answer with a suitable description. Show computations to support your answer.

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

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M919216

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