In the month of June, Jose Hebert\'s Beauty Salon gave 4,400 haircuts, shampoos,

Question

In the month of June, Jose Hebert's Beauty Salon gave 4,400 haircuts, shampoos, and permanents at an average price of $40 During the month fixed costs were $16,800 and variable costs were 75% of sales. Determine the contribution margin in dollars, per unit and as a ratio. (Round contribution margin per unit and contribution margin ratio to 2 decimal places, e.g. 5.25 & 10.50.) Contribution margin Contribution margin per unit Contribution margin ratio 96 LINK TO TEXT 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.) Break-even point Break-even point units LINK TO TEXT VIDEO: SIMTLAR EXERCISE Compute the margin of safety in dollars and as a ratio. (Round answers to 0 decimal places, e.g. 1,225.) Margin of safety Margin of safety ratio

Explanation / Answer

Contribution Margin Per Unit = Sales - Variable Cost

= $ 40 - ($ 40 * 75%)
= $ 10

Contribution Margin = Contribution Margin Per Unit * Total Number of Haircuts

= $ 10 * 4,400

= $ 44,000

Contribution Margin Ratio = Contribution Margin / Sales *100

= $ 10 / $ 40 *100

= 25%

Hence the correct answer is :

Contribution Margin $ 44,000

Contribution Margin Per Unit  $ 10

Contribution Margin Ratio 25.00%

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Break Even Point (In Dollars) = Fixed Cost / Contribution Margin Ratio

= $ 16,800 / 25%

= $ 67,200

Break Even Point ( Units ) = Fixed Cost /Contribution Margin Per Unit

= $ 16,800 / $ 10

= 1,680 Units

Hence the correct answer is

Break Even Point $ 67,200

Break Even Point  1,680 Units

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Margin of Safety( Dollars) = Actual Sales - Break Even Sales

= ($ 40 * 4,400) - $ 67,200

= $ 108,800

Margin of Safety( %) = (Actual Sales - Break Even Sales ) / Actual Sales *100

= $ 108,800 / $ 176,000 *100

=61.82%

= 62%

Hence the correct answer is

Margin of Safety $ 108,800

Margin of Safety 62%

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