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Determine the annual break-even point

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Andre has asked you to evaluate his business Andre's hair styling. Andre has five barbers working for him (Andre is not one of them) each barber is paid $9.50 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 $1750 per month. Hair shampoo used on clients is $.40 cents per client. Assume that the only service performed is the giving of haircuts (including shampoo) the unit price is $12. Andre has asked you to find the following information:

1- Find the contribution margin per hair cut assume the barber's compensation is a fixed cost.

2- Determine the annual break-even point, in number of haircuts.

3- What will the operating income if 20,000 haircuts are performed?

4- Suppose André revises the compensation method. The barbers will receive $4 per hour plus $6 for each haircut. What is the new contribution margin per haircut? What is the annual breakeven point (in number of haircuts)?

Reference no: EM131815161

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