Consider the following scenario: Andre has asked you to evaluate his business, Andres Hair
Styling. Andre has five barbers working for him. (Andre is not one
of them.) Each barber is paid $9.90 per hour and works a 40-hour
week and a 50-week year, regardless of the number of haircuts. Rent
and other fixed expenses are $1,750 per month. Hair shampoo used on
all clients is $0.40 per client. Assume that the only service
performed is the giving of haircuts (including shampoo), the unit
price of which is $12. Andre has asked you to find the following
information.
Grading Criteria
Percentage
Find the contribution margin per haircut.
25%
Determine the annual break-even point, in number of
haircuts.
25%
What will be the operating income if 20,000 haircuts are
performed?
25%
Suppose Andre revises the compensation method. The barbers will
receive $4 per hour plus $6 for each haircut. What is the new
contribution margin per haircut? What is the annual break-even
point (in number of haircuts)?
25%
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