In the month of June, Jose Hebert’s Beauty Salon gave 4,500 haircuts, shampoos,

Question

In the month of June, Jose Hebert’s Beauty Salon gave 4,500 haircuts, shampoos, and permanents at an average price of $30. During the month, fixed costs were $16,500 and variable costs were 75% of sales.

Determine the contribution margin in dollars, per unit and as a ratio

Using the contribution margin technique, compute the break-even point in dollars and in units. (Round answers to 0 decimal places, e.g. 1,225.)

In the month of June, Jose Hebert’s Beauty Salon gave 4,500 haircuts, shampoos, and permanents at an average price of $30. During the month, fixed costs were $16,500 and variable costs were 75% of sales.

Determine the contribution margin in dollars, per unit and as a ratio

Contribution margin $

Explanation / Answer

Variable cost=($30*75%)=$22.5

contribution margin=Sales-Variable cost

=(30-22.5)

=$7.50 per unit

=(7.5*4500)=$33750

contribution margin ratio=contribution margin/Sales

=(7.5/30)=25%

Breakeven point=Fixed cost/contribution margin

=(16500/7.5)=2200 units

=Fixed cost/contribution margin ratio

=(16500/0.25)=$66000.

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