Question

In the month of June, Jose Hebert’s Beauty Salon gave 3,580 haircuts, shampoos, and permanents at an average price of $34. During the month, fixed costs were $16,920 and variable costs were 75% of sales. Determine the contribution margin in dollars, per unit and as a ratio. (Round contribution margin per unit and contribution margin ratio to 2 decimal places, e.g. $5.25 & 10.50%.) a. Contribution margin $ Contribution margin per unit $ Contribution margin ratio % LINK TO TEXT b. Using the contribution margin technique, compute the break-even point in dollars and in units. (Round answers to 0 decimal places, e.g. 1,225.) Break-even point $ Break-even point units LINK TO TEXT c. Compute the margin of safety in dollars and as a ratio. (Round answers to 0 decimal places, e.g. 1,225 & 25%.) Margin of safety $ Margin of safety ratio %.

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

In June, Jose Hebert’s Beauty Salon gave 3,580 haircuts, shampoos, and permanents at an average price of $34. During the month, fixed costs were $16,920 and variable costs were 75% of sales.

Unitary variable cost= 34*0.75= 25.5 per haircut

Contribution margin= selling price - unitary variable cost= $8.5

Contribution margin ratio= CM/ selling price= 25%

Total contribution margin= 3,580*8.5= $30,430

Break-even point (units)= fixed costs/ contribution margin

Break-even point (units)= 16,920/8.5= 1991 units

Break-even point (dollars)= fixed costs/ contribution margin ratio

Break-even point (dollars)= 16,920/0.25= $67,680

Margin of safety in units= 3,580 - 1,991= 1,589 units

Margin of safety in dollars= 121,720 - 67,680= $54,040

Margin of safety ratio= (current sales level - break-even point)/current sales level

Margin of safety ratio= 1,589/3,580= 0.444=44.4%