Question

In the month of June, Jose Hebert’s Beauty Salon gave 4,125 haircuts, shampoos, and permanents at an average price of $40. During the month, fixed costs were $16,500 and variable costs were 75% of sales.
Determine the contribution margin in dollars, per unit and as a ratio. (Round contribution margin and contribution margin per unit to 2 decimal places, e.g. 5.75.)

Contribution margin=
Contribution margin per unit=
Contribution margin ratio=

Using the contribution margin technique, compute the break-even point in dollars and in units.

Breakeven Point ($)=
Breakeven Point (units)=

Answer 1

Answer:

Contribution margin= $41,250

Contribution margin per unit=  $10

Contribution margin ratio= 0.25 or 25%

Breakeven Point ($)=$66,000

Breakeven Point (units)=1,650 units

Explanation:

Contribution margins = sales price - variable costs

The sales price is $40 per unit.

variable costs per units will be total variable cost / total units

total variable costs will be 75% of sales

= 4,125 x $40

=$165,000

variable cost will be 75/100 x 165,000

=0.75 x 165,000

=$123,750

variable cost per item is $123, 750 / 4125

variable cost per unit is $30

(Total)Contribution margin is sales - variable costs

=$165,000 - $123,750

=$41,250

Contribution margin per unit will be $40- $30

Contribution margin per unit is $10

Contribution margin ration =total revenue - variable costs

      total revenue

                                             = $165,000 - $123,750

                                                         $165,000

=41,240/ 165,000

=0.25

=As a percentage, contribution margin ratio = 25%

Break-even point using contribution margin technique

Break-even  in units = fixed cost/ contribution margin per unit

= $16,500/ 10

=1650 units

Break-even in dollars= Breakeven units x selling price

=1650 x 40

=$66,000