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%
