Homework Help: Management Accounting

Posted by Charlotte Holmes on Wednesday, May 23, 2007 at 10:08pm.

Andre has asked you to evaluate his business, Andre's 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 .40 per client. Assume that the only service performed is the giving of haircuts, the unit price which is $12. Andre has asked you find the following:
1. Determine the annual break-even point, in the number of haircuts
2. What will be the operating income if 20,000 haircuts are performed?
3.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)?

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