# Andre's Hair Styling

Good Essays
573 Words
Grammar
Plagiarism
Writing
Score
Andre's Hair Styling
Andre of Andre’s Hair Styling is evaluating his business and has provided the following information about his company.
Andre has five barbers working for him. (Andre is not one of them.) Each barber is paid \$9.90 per hour and works a 40-hour week and a 50-week year, regardless of the number of haircuts. Rent and other fixed expenses are \$1,750 per month. Hair shampoo used on all clients is .40 per client. Assume that the only service performed is the giving of haircuts (including shampoo), the unit price of which is \$12.
Based on the information provided, Andre wants you to find the contribution margin cost per haircut. The calculations are as followed.
There are 5 barbers and they are paid \$9.90 per hour. They work 40 hours a week and 50 weeks per year. This is considered a guaranteed salary (Onyiri, 2008).
If you multiply \$9.90 per hour times 40 hours a week by the 5 barbers they will make \$396 a week per barber.
To find the contribution margin per haircut you will need to do the following calculations.
Selling price per unit= \$12 and variable cost per unit =\$.40 = \$12 – 0.40 =\$11.60
Contribution margin (CM) = selling price- variable cost= \$11.60
Now Andre wants you to look at the information given and determine what his annual break-even point, in the number of haircuts needed, will be. To do this we will need to know what a break-even point is. A Break-even point is where a sale levels where there is no profit or loss. This number let Andre know if the business is worth continuing or if he should shut down.

What is the fixed cost?
Barbers salaries: 9.90 x 40 x 50 x 5 = \$99,000
Annual Rent = monthly rent x 12 months = \$1750 x 12 = \$21,000
Total fixed = salary + annual rent = \$99,000 + 21,000 = \$120,000
Break even = total fixed cost/ cm = \$120,000/11.60 = \$10,345 rounded up
So the total number of haircuts that should be performed in order for Andre to stay in business should be around 17 haircuts a day.

If he does

References: Horngren, C. T., Sundem, G. L., Stratton, W. O., Burgstahler, D., Schatzberg, J (2008) Introduction to Management Accounting Chapters 1-17, 14th Edition, Pearson Prentice Hall. https://mycampus.aiu-online.com/MainFrame.aspx?ContentFrame=/default.aspx, Onyiri, Sunny, online chat session, Retrieved September 21, 2008.

## You May Also Find These Documents Helpful

• Powerful Essays

Find the contribution margin per haircut. Assume that the barbers’ compensation is a fixed cost. Show calculation to support your answer…

• 1082 Words
• 5 Pages
Powerful Essays
• Satisfactory Essays

At Healthy Hair, the cost of a children’s haircut x is \$4 and the cost of an adult haircut y is \$14. The manager’s goal for the day is to have at least 5 children’s cuts, at least 20 adult cuts, and to have total sales be greater than \$500. Write a system to represent this situation.…

• 263 Words
• 3 Pages
Satisfactory Essays
• Powerful Essays

82,000 =\$400/hour * 205 hours 110,400 =\$800/hour * 138 hours 192,400 9,844 =\$28.70 * (205 hours + 138 hours) 182,556 8,000…

• 923 Words
• 4 Pages
Powerful Essays
• Good Essays

Contribution Margin “is a cost accounting concept that allows a company to determine the profitability of individual products” (Investopedia, 2013). In order to determine the contribution margin, one must take the revenues and subtract it from the variable cost which would look like this: Revenues – Variable Cost. “Fixed costs are costs that do not vary in total when activity levels (or volume) of operations change. A good example of a fixed cost is rent expense. Rent would not vary whether the home was almost full or almost empty; thus, rent is a fixed cost” (Baker, 2011). “Variable costs, on the other hand, are costs that vary in direct proportion to changes in activity levels (or volume) of operations. A good example of a variable cost is food for the group home residents. Food would vary directly, depending on the number of individuals in residence; thus, food is a variable cost” (Baker, 2011).…

• 318 Words
• 2 Pages
Good Essays
• Satisfactory Essays

Determine the following, showing as part of your answer the formula that you used in your computation. For example, the formula used to determine the contribution margin ratio (part a) is Contribution Margin Ration = Unit Sales Price – Variable Costs per Unit…

• 1713 Words
• 9 Pages
Satisfactory Essays
• Satisfactory Essays

New Contribution Margin = New Price per unit – Variable cost per unit =\$8.5-\$5.5 =\$3…

• 620 Words
• 3 Pages
Satisfactory Essays
• Good Essays

Knowing it was a retirement community she did not want to over-charge, but she wanted to be fair to both herself and the client. Using a formula of, f(x)= \$______, Stacey could easily find out that if she charged each client \$105 weekly she would only need 7 clients to earn \$735 a week. The formula works like this (7)(\$105)= \$735 weekly and \$735*4= \$2,940 a month, which would more than pay for her college tuition of \$1020 a year. Stacey knew what each year of tuition would be by simply breaking it down with a formula of T(x)=\$700+\$320x with T being the number of years, such as, T(1), T(2), T(3), and T(4). To simply break down what tuition she would be paying for the four years she would be attending, Stacey used her math skills to work out this math problem of \$700+\$320(1)= \$1020 / \$700+\$320(2)= \$1340 / \$700+\$320(3)= \$1660 / \$700+\$320(4)=…

• 703 Words
• 3 Pages
Good Essays
• Good Essays

For computer paper for the next fiscal quarter, according to the information given by the superintendent, Mendel Paper Company will receive a profit of \$240,000.00. If 30,000 units are produced and sold at \$14.00 then the total sales will be \$420,000.00. However it costs the company \$6.00 to produce each unit. So, 30,000 units at \$6.00 a unit costs the company \$180,000.00. The total sales cost of \$420,000.00 minus the cost of labor of \$180,000.00 equals the profit of \$240,000.00. News came in however from the vice-president of purchasing that the company has firm orders for 35,000 cartons of computer paper. So, if the company continues to sell each unit of computer paper at \$14.00 then the total cost of sales is \$490,000.00. It still costs Mendel Paper Company \$7.00 to produce each unit, therefore costing the company \$245,000.00. Making the total profit of computer paper \$245,000.00.…

• 1378 Words
• 5 Pages
Good Essays
• Good Essays

## Ch 11

• 3317 Words
• 14 Pages

1. Timmy makes \$100 per week as a taxidermist. He spends all this income to buy pizza and hair gel. The price…

• 3317 Words
• 14 Pages
Good Essays
• Good Essays

1. Find the contribution margin per haircut. Assume that the barbers' compensation is a fixed cost. Show calculations to support your answer.…

• 482 Words
• 2 Pages
Good Essays
• Good Essays

COMPANY BACKGROUND: A jacket potato vendor charges \$5.72 per spud sold. The variable cost of each potato served is \$0.91. The stall has a fixed cost of…

• 1347 Words
• 6 Pages
Good Essays
• Good Essays

Find the contribution margin per haircut. Assume that the barbers' compensation is a fixed cost. Show calculations to support your answer.…

• 615 Words
• 3 Pages
Good Essays
• Satisfactory Essays

BU 122 Assignment 6 BYP 22-2 TBoillard (a) The variable costs per unit are: Cost of goods sold (\$600,000 ÷ 200,000) = \$3.00 Selling expenses (\$140,000 ÷ 200,000) = .70 Administrative expenses (\$40,000 ÷ 200,000) = .20 Total \$3.90…

• 332 Words
• 2 Pages
Satisfactory Essays
• Satisfactory Essays

Rodriguez operates a variety store that provides an annual revenue of \$480 000. Each year, he pays \$25 000 in rent for the store, \$15 000 in business taxes, and \$350 000 on products to sell. He estimates he could put the \$80 000 he has invested in the store into his friend’s restaurant business instead and earn an annual 20 percent profit on his funds. He also estimates that he and his family could earn a total annual wage of \$90 000 if they worked somewhere other than the store.…

• 362 Words
• 2 Pages
Satisfactory Essays