Assume andre revises the compensation method

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Reference no: EM139859

Q. THIS IS FOR magarwal

Assume the following scenario:
Andre has asked you to evaluate his business Andres Hair Styling. Andre has 5 barbers working for him. (Andre is not one of them.) Each barber is paid $9.90 per hour also works a 40-hour week also a 50-week year, regardless of the number of haircuts. Rent also other fixed expenses are $1,750 per month. Hair shampoo used on all clients is .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.

1. Find the contribution margin per haircut. Assume that the barbers' compensation is a fixed cost. Elucidate how calculations to support your answer.

2. Determine the annual break-even point, in number of haircuts. Support your answer with an appropriate explanation. Elucidate how calculations to support your answer.

3. Illustrate will be the operating income if 20,000 haircuts are performed? Elucidate how calculations to support your answer.

4. Assume Andre revises the compensation method. The barbers will receive $4 per hour plus $6 for each haircut. Illustrate is the new contribution margin per haircut? Illustrate is the annual break-even point (in number of haircuts)? Elucidate how calculations to support.

Reference no: EM139859

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