12

Jennys Cutting Station is a new concept in haircuts; low cost and very quick. Set in a local mall, Jennys offers 15 minute haircuts for harried shoppers who do not have time for lengthy appointments. To ensure that the clients are in and out quickly, she schedules her 5 employees based on expected client traffic. Each of the employees is paid $1,200 per month, with part of their pay coming from client tips. Jenny pays rent and overhead costs of $2,000 per month. Because of the quick nature of the service, Jenny doesnt have time to clean combs in between clients, so she uses a new comb for each customer, at a cost of $.55 each. She also provides shampoo and conditioner for each client at a cost of $.95 per client. The average price for a haircut is $12. Jenny pays herself $5,000 per month. What is Jennys contribution margin per haircut?

a

$10.20

b

$11.05

c

$11.45

d

$10.50