In the month of June, Jose Hebert\'s Beauty Salon gave 3,620 haircuts, shampoos,

Question

In the month of June, Jose Hebert's Beauty Salon gave 3,620 haircuts, shampoos, and permanents at an average price of $30. During the month, fixed costs were $19,700 and variable costs were 60% of sales. Determine the contribution margin in dollars, per unit, and as a ratio. (Round the contribution ratio to 0 decimal places, e.g. 27%, contribution margin per unit to 2 decimal places, e.g. 15.25 and answer to the nearest whole dollar, e.g. 5,275.) Contribution Margin in Dollars $ Contribution Margin Per Unit $ Contribution Margin Ratio % Using the contribution margin technique, compute the break-even point in dollars and in units. (Round answers to 0 decimal places, e.g. 1,750.) Break-even sales (in dollars) $ Break-even sales (in units) units Compute the margin of safety in dollars and as a ratio. (Round the Margin of Safety ratio to 0 decimal places, e.g. 27%.) Margin of safety (in dollars): $ Margin of safety (ratio): %

Explanation / Answer

Sales: 3620*30 =108600

Fixed cost: 19700

Variable cost: 60/100 * 3620*30 = 6516

Contribution Margin in dollars = sales – variable cost = 10860-6516 = 43440

Contribution Margin per Unit= Contribution Margin in dollars/ units = 43440/3620 = 12

Contribution Margin Ratio %= Contribution Margin in dollars/sales*100 %= 43440/108600 *100% = 40%

Break-even sales (in dollars) = Fixed cost/contribution margin per unit*30= 19700/12*30 = 49250

Break-even sales (in units) = fixed cost/contribution margin per unit= 19700/12 = 1642

Margin of safety (in dollars)= sales-break-even sales (in dollars)= 108600-49250 = 59350

Margin of safety (ratio)% = Margin of safety (in dollars)/sales*100% = 59350/108600*100= 55%

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