Reference no: EM133001208

Sarah's Cutting Station offers a new concept in haircuts; low cost and very quick. Set in a local mall, Sarah's offers 15-minute haircuts for harried shoppers who do not have time for lengthy appointments. To ensure that the clients are in and out quickly, she schedules her 5 employees based on expected client traffic. Each of the employees is paid $ 1210 per month, with part of their pay coming from client tips. Sarah pays rent and overhead costs of $ 2300 per month on the facility. Because of the quick nature of the service, Sarah doesn't have time to clean combs in between clients, so she uses a new comb for each customer, at a cost of $ 0.65 each. She also provides shampoo and conditioner for each client at a cost of $ 1.00 per client. The average price for a haircut is $ 11. Sarah pays herself $ 5200 per month.

Problem 1: What is Sarah's contribution margin ratio?