Exercise 19-2 In the month of June, Jose Hebert’s Beauty Salon gave 3,800 haircu
ID: 2580965 • Letter: E
Question
Exercise 19-2 In the month of June, Jose Hebert’s Beauty Salon gave 3,800 haircuts, shampoos, and permanents at an average price of $40. 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. (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 % 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 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
Answer:-Selling average price =$40
No. of Haircuts = 3800
Fixed Costs= $16500
Variable cost = 75% of sales
Contribution margin per unit = Selling price per unit-Variable cost per unit
=$40-(75%*$40) = $40-$30 = $10 per unit
Contribution margin ratio =Contribution /Sales*100
=$10/$40*100 = 25%
Contribution margin $ = Sales – Variable cost
=3800*$40 per unit-(3800*$40 per unit*75%)
=$38000
Break even points in units = Fixed cost/ Contribution margin per unit
=$16500/$10 per unit
= 1650 units
Break even points in $ = Fixed costs / Contribution margin ratio*100
=$16500/25% = $66000
Margin of safety in $ = Profit/ Contribution margin ratio
= $21500/25% = $86000
Margin of safety in ratio % = Margin of safety sale/Total sales*100
=$86000/152000*100 = 57%
Total sales = Margin of safety sale+Break Even sales
=$66000+$86000 =$152000
Profit = Contribution – Fixed cost
=$38000-$16500 = $21500
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