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Variable cost per unit

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Reference no: EM13551165

Kelly owns a salon. She gives her hairdresser two options for using her facility, equipment and salon products.They can pay Kelly a flat rental of $1600 per month or 2)They can pay her $5 per haircut plus 10% their revenue. The hairdresser charge their customers $30 per haircut. The hairdresser incur no other expenses.

Requirements:
1. At what point (number of haircuts per month) will the hairdressers be indifferent between the two payments options?
Begin by calculating the indifferent point: FC=Fixed costs, VCU= Variable cost per unit.

VCU (Option 1) x units +FC (Option1) = VCU (Option2) x units) + FC (Option2)

Reference no: EM13551165

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