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Martha has asked you to evaluate her business marthas

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Martha has asked you to evaluate her business, Martha's Tattoo Salon. Martha has five tattoo artists working for her. (Martha is not one of them.) Each tattoo artist is paid $9.90 per hour and works 40 hours a week and 50 weeks a year, regardless of the number of tattoos. Rent and other fixed expenses are $1,750 per month. Assume that the only service performed is the giving of tattoos, whose unit price is $12.

Given this information:

  1. Find the contribution margin per tattoo. Assume that the tattoo artists' compensation is a fixed cost.
  2. Determine the annual breakeven point in number of tattoos.
  3. What will be the operating income if 20,000 tattoos are performed?
  4. Assume Martha revises the compensation method. The tattoo artist will receive $4 per hour plus $6 for each tattoo. What will be the new contribution margin per tattoo? What is the annual breakeven point in number of tattoos?

Reference no: EM13589890

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