Identification of Fixed vs. Variable Costs and CVP Analysis You have been asked to help Tammys Nail Salon with their expansion plans. The salon offers manicures and pedicures to a suburban clientele in Western New York. Information on their business at their current location is as follows: Monthly lease = $3,500 (Gross) includes utilities, maintenance, and taxes Managers salary = $30,000/year Monthly advertising and web expense = $1,500 Average customer bill = $45 (some manicures only, some mani/pedi with designs, etc) On average, technicians spend 1.5 hours with a customer Technicians cost $15/hour including applicable payroll taxes Materials used (polish, swabs, cleanser, etc.) average about $1 per client The salon is open 6 days per week, 4 weeks per month.

The owner wants to expand the salon in order to make more money. The new location is 50% bigger than the old one, in a more expensive part of town, and has a monthly lease cost of $6,200. She feels one manager could still handle the salon. She does not expect any changes in the other costs.

MUST SHOW ALL WORK

A.What is the new break-even number of customers?

B. The owner wants you to determine how many customers they must attract in order to generate a profit of $3,000 per month.

C. What other factors should be considered in our financial analysis before we decide whether or not to expand (hint: what assumptions are we making about our other costs that might not be correct?)

D. What non-financial factors need to be considered?