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) Eash barber is paid $9,90 per hour and workd a 40-hour week and a 50-week, regardless of the number of haircuts. Rent and other fixed expenses are $1,750 per month. Hair shampoo used on all clinents is .40 per client. Assume has asked you to find the following information.
2. Determine the annual break-even point, in number of haircuts.
3. What will be the operating income if 20,000 haircutd are performed?
4. 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)
you are missing one critical piece of information -- the price of a haircut.
that said, these are usually algebra problems. Costs are 1750. + 9.90*(5*40*50) + 0.40*HC. Revenues are P*HC. Plug in your missing P, and solve for HC.
To solve these questions, we need to consider the given information and use some algebraic calculations. However, you mentioned that the price of a haircut is missing, which is crucial to finding the solutions. In this case, I will explain the general steps involved in solving these types of problems, assuming we have all the necessary information.
1. Annual fixed expenses:
Given: Rent and other fixed expenses are $1,750 per month.
Solution: We need to calculate the annual fixed expenses by multiplying the monthly fixed expenses by 12 (as there are 12 months in a year).
Annual fixed expenses = $1,750 * 12
2. Annual break-even point (number of haircuts):
Given: 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.
Solution: To find the annual break-even point, we need to determine the number of haircuts required to cover the total expenses.
The total expenses consist of fixed expenses and variable expenses.
Fixed expenses = Annual fixed expenses (from step 1)
Variable expenses: For each haircut, the cost of shampoo is $0.40 per client. Since the number of haircuts is unknown, we'll denote it as HC.
Variable expenses = $0.40 * HC
To calculate the annual break-even point, we need to set the total revenue equal to the total expenses.
Total revenue = Total expenses
P * HC = Fixed expenses + Variable expenses
Here, P represents the price of a haircut, which is missing. To solve this equation, you'll need to know the value of P.
3. Operating income with 20,000 haircuts:
Given: Suppose 20,000 haircuts are performed.
To find the operating income, we subtract the total expenses from the total revenue:
Operating income = Total revenue - Total expenses
Total revenue = P * 20,000 (where P is the price of a haircut)
Total expenses = Fixed expenses + Variable expenses
Substitute the values into the equation and calculate the operating income.
4. New compensation method:
Given: The barbers will receive $4 per hour plus $6 for each haircut.
Solution:
To find the new contribution margin per haircut, we need to calculate the difference between the price of a haircut (P) and the variable cost per haircut.
Contribution margin per haircut = P - variable cost per haircut
The variable cost per haircut consists of wages paid to barbers and the cost of shampoo used for each haircut.
Variable cost per haircut = $4 + $0.40
To find the new annual break-even point (in number of haircuts), we use the same equation as in step 2 but substitute the new contribution margin per haircut in place of P.
Remember, for more accurate solutions, it is important to have the price of a haircut.