Andre has a hair styling business with five workers that are paid $9.90 per hour,they work 40-hour per week and 50 weeks a year.Rent is $1,750 per month, hair shampooing is .40 per client, haircuts unit price is $12. Andre needs your help in finding the following information.
What will be the operating income if 20,000 haircuts are performed?
See my response to the post by Sharon Williams below.
To calculate the operating income, we need to determine the total revenue and subtract the total expenses. Let's break it down step by step:
1. Calculate the total revenue from haircuts:
Since each worker is paid $9.90 per hour and works 40 hours per week for 50 weeks a year, their annual salary is:
$9.90/hour * 40 hours/week * 50 weeks = $19,800 per worker.
So, the total annual salary for the five workers is:
$19,800/worker * 5 workers = $99,000.
Now, let's calculate the revenue from haircuts:
If each worker can perform 20 haircuts per day and they work for 50 weeks, the total number of haircuts performed per year is:
20 haircuts/day * 250 days/year = 5,000 haircuts/year per worker.
Since there are five workers in total, the total number of haircuts performed per year is:
5,000 haircuts/year/worker * 5 workers = 25,000 haircuts/year.
The revenue from haircuts can be calculated by multiplying the number of haircuts by the unit price of $12:
$12/haircut * 25,000 haircuts/year = $300,000.
2. Calculate the expenses:
The monthly rent is given as $1,750 per month. Since there are 12 months in a year, the annual rent expense is:
$1,750/month * 12 months = $21,000.
The expense for hair shampooing can be calculated by multiplying the number of haircuts by the shampooing cost of $0.40 per client:
$0.40/haircut * 25,000 haircuts/year = $10,000.
The total expenses can be calculated by summing up the rent expense and shampooing expense:
$21,000 (rent) + $10,000 (shampooing) = $31,000.
3. Calculate the operating income:
Operating income is the difference between total revenue and total expenses:
Operating income = Total revenue - Total expenses
= $300,000 - $31,000
= $269,000.
Therefore, if 20,000 haircuts are performed, the operating income would still be $269,000.