In the month of June, Kathys Beauty Salon gave 3,500 haircuts, shampoos, and permanents at an average

Question:

In the month of June, Kathy’s Beauty Salon gave 3,500 haircuts, shampoos, and permanents at an average price of $30. During the month, fixed costs were $16,800 and variable costs were 80% of sales.

Instructions

(a) Determine the contribution margin in dollars, per unit and as a ratio.

(b) Using the contribution margin technique, compute the break-even point in dollars and in units.

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...