RECOMMENDED!!Evaluating a Business: Andre’s Hair Styling

  

Evaluating a Business: Andre’s Hair StylingAndre has asked you to evaluate his business, Andre’s Hair
Styling. Andre has five barbers working for him. (Andre is not one of them.)
Each barber is paid $9.90 per hour and works a 40-hour week and a 50-week year,
regardless of the number of haircuts. Rent and other fixed expenses are $1,750
per month. Assume that the only service performed is the giving of haircuts,
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?2. Determine the annual break-even point, in number of
haircuts?3. What will be the operating income if 20,000 haircuts are performed?
4. Suppose Andre revises the compensation method. The
barbers will receive $4 per hour plus $6 for each haircut. What is the new
contribution margin per haircut? What is the annual break-even point (In number
of haircuts)?

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