Reference no: EM132541586

Mae Wong owns "Cute Nails Salon", located on Chapel St, South Yarra, Melbourne, Australia. She employs eight (8) manicurists and pays each a base rate of $1,000 per week (5 working days per week).

Mae does not work in the business, and so she has organised one of the manicurists to act as the manager. That one employee receives an extra $250 per week.

In addition, to the base rate, each manicurist receives a commission of $6.50 per client / manicure. Only one manicurist works on any one client at any one time.

Other costs are as follows:

Advertising $300 per week

Rent $1,000 per week

Nail supplies (nail polish remover, colour etc): $5 per manicure

Magazines subscriptions (for customer enjoyment): $10 per week

Depreciation of furniture and equipment: $150 per week

Mae currently charges her customers $50 per manicure

Required:

Question a) Explain at least four (4) key assumptions underlying CVP analysis

Question b) Determine and clearly show your calculations;

i. variable cost per manicure

ii. and the total weekly fixed cost

Question c) Calculate the contribution margin per manicure (unit)

Question d) Calculate the weekly break-even point in

i. units and

ii. in dollars

Question e) Mae currently works full time at a council and her current salary is $2,200 per week. Mae decides to resign from the council, in order to work full time managing her own business. Indicate the minimum further number of manicures required that Mae would not be financially any worse off as a result of her decision.

Question f) Mae's workers want to work casual hours and wish to charge Mae according to the number of clients they serve. They will charge Mae $30 per manicure / client, and this will replace the base pay and commission. With Mae working in her own business, she requires a weekly profit of $2,200. If the weekly number of manicures is limited to 200, what price per manicure would need to be set to satisfy her workers and Mae's targets?