Planning and Budgeting

Andre's Hair Stylling employs 5 barbers at $9.90 per hour, 40 hours per week, and 50 weeks per year. The salary rate applies regardless of the number of haircuts performed by the barber. Fixed expenses total $1,750 per month and the cost for shampoo per client is $0.40. The total cost for each hair cut is $12.00. Using this data, I found the following information. 1. Contribution margin is sales revenue less variable costs. It is the amount available to pay for fixed …

…per Unit 50 weeks x ($4.00/hour x 40 hours) x 5 barbers = $40,000 Break even in units = 21,000 rent, yearly + 40,000 salaries / $5.60 Break even in units = 10,893 haircuts References: Horngren, C., Sundem, G. & Stratton, W. (2005). Introduction to Management Accounting. Upper Saddle River, NJ: Pearson Prentice Hall. Operating Income and Operating Profit Margin. Retrieved June 27, 2006 from http://beginnersinvest.about.com/cs/investinglessons/l/bloperincmarg.htm?terms=profit+margin Contribution Margin. Retrieved June 28, 2006 from http://en.wikipedia.org/wiki/Contribution_margin_analysis