Determine the annual break-even point in number of haircuts


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)?

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Accounting Basics: Determine the annual break-even point in number of haircuts
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