IP 3 Accounting
Petrina Barkley
IP 2
Managerial Accounting
Karina KasztelnikAmerican Intercontinental University On-line
Consider the following scenario:
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 $0.40 per client. Assume that the only service performed is the giving of haircuts (including shampoo), the unit price of which is $12. Andre has asked you to find the following information.
Abstract
In this paper there will be an explanation and break down of the contribution margin per haircut; an assumption that the barbers' compensation is a fixed cost. Calculations will be shown to support the answer. There will be a determination of the annual break-even point, in number of haircuts; there will also be an appropriate explanation with calculations to support the answer.
What will be the operating income if 20,000 haircuts are performed? Calculations will be shown to support answer.
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)? There will also be calculations to support the answer.
First the Contribution margin per head = Hair cut price – Shampoo expense = 12 - $.40 = $ 11.60 per head
The break-even point is all the fixed costs that are recuperated and the company isn’t creating profit or losing profit and afterwards at this point the company then starts building profits. Which leads to this:
Break-even point = Fixed cost/ Contribution margin
Fixed cost = Barber’s compensation + Rent and any other fixed expenses meaning;
IP 2
Managerial Accounting
Karina KasztelnikAmerican Intercontinental University On-line
Consider the following scenario:
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 $0.40 per client. Assume that the only service performed is the giving of haircuts (including shampoo), the unit price of which is $12. Andre has asked you to find the following information.
Abstract
In this paper there will be an explanation and break down of the contribution margin per haircut; an assumption that the barbers' compensation is a fixed cost. Calculations will be shown to support the answer. There will be a determination of the annual break-even point, in number of haircuts; there will also be an appropriate explanation with calculations to support the answer.
What will be the operating income if 20,000 haircuts are performed? Calculations will be shown to support answer.
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)? There will also be calculations to support the answer.
First the Contribution margin per head = Hair cut price – Shampoo expense = 12 - $.40 = $ 11.60 per head
The break-even point is all the fixed costs that are recuperated and the company isn’t creating profit or losing profit and afterwards at this point the company then starts building profits. Which leads to this:
Break-even point = Fixed cost/ Contribution margin
Fixed cost = Barber’s compensation + Rent and any other fixed expenses meaning;