Perform break even calculation Your SPA manager just comes to you with this \"Gr

Question

Perform break even calculation Your SPA manager just comes to you with this "Great Idea" to increase SPA revenue. Simply give a FREE massages for every each new customer. "With the all the new business, we will be making more money than we can count", the SPA manager boosts. 25 Points You ask, "How many massages do we need to sale to break even?" Calculate the number of massages the SPA needs to be paid for to break even for the free massages. Labor cost per massage Operating Cost Overhead Cost Sales price of massage $18 15% $336 $75 1123 Estimate # of comp massages

Explanation / Answer

(A).sale price = $ 75 (B).Labour cost per massage = $ 18

(C).operating Cost =15 % (Assumption : maeant as 15% of Sale price)= 75*15% =11.25

Total variable cost = (B)+(C)=18+11.25=29.25

Fixed cost = $336

Number of masseges to snet to meet break even point= Contributuon per massage/ Total fixed cost

Contribution= Sale price - Variable cost

= 75-29.5=45.5

BEP= 336/45.5= 8 (Approx)

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