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4 Planning & Budgeting

Andre has asked you to evaluate his business, Andre's Hair Stylling. 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. Hair shampoo used on all clients is .40 per client. 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. Show calculations to support your answer.
• Contribution margin is the marginal income per unit sold. The formula is the per unit sales price minus the variable cost per unit. For Andre, with a sales price of $12.00 and a variable cost of $0.40 per cut, his Contribution Margin (income per cut) is $11.60:
unit sales price $ 12.00
- variable cost $ 0.40......


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Approximate Word Count: 789
Approximate Pages: 4 (250 words per double-spaced page)

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