Managerial Accounting Andres Hair Styling Assignment. Find the contribution margin per haircut. Assume that the barbers' compensation is a fixed cost. Show calculations to support your answer.

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

(Contribution margin = Revenue - Variable Costs) =

$12 - $0.40 = $11.60 per haircut.

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

(Compensation of staff) 5 x $9.90 x 40 hours x 50 weeks = $99,000 a year

(Fixed expenses) $1750 per month x 12 months = 21,000 a year

$99,000 + $21,000 = $120,000 total cost
$120,000 divided by $11.60 = 10,344.83 cuts (rounded up to) 10,345 cuts in order to meet break-even point.

• What will be the operating income if 20,000 haircuts are performed? Show calculations to support your answer.

20,000 x $11.40 = 22, 8000- $120,000.00 = $108,000.00

• 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)? Show calculations to support your answer.

New Contribution margin: $12 - $6 - $0.40 = $5.60

New Break-even Point: 5 workers x $4 per hour x 40 hrs x50 weeks + $1750 x 12 months = $40,000 + $21,000 = $61,000

$61,000.00 divided by $5.60 = $10,893.00 (New annual break-even point in cuts).