Assume Touch of Gray Salon, a Berkeley hair salon provides various hair styling services, including cuts, perms and shaves. Annual fixed costs are $225,000 and variable costs are 45% of sales revenue. Last year’s revenue totaled $450,000. Required: Determine the break-even point in sales dollars Determine the sales dollars required for an annual pretax profit of $200,000
Assume Touch of Gray Salon, a Berkeley hair salon provides various hair styling services, including cuts, perms and shaves. Annual fixed costs are $225,000 and variable costs are 45% of sales revenue. Last year’s revenue totaled $450,000. Required: Determine the break-even point in sales dollars Determine the sales dollars required for an annual pretax profit of $200,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Assume Touch of Gray Salon, a Berkeley hair salon provides various hair styling services, including cuts, perms and shaves. Annual fixed costs are $225,000 and variable costs are 45% of sales revenue. Last year’s revenue totaled $450,000.
Required:
- Determine the break-even point in sales dollars
- Determine the sales dollars required for an annual pretax profit of $200,000
Expert Solution
Step 1 Introduction
The break even sales are the sales where business earns no profit no loss during the period. The break even sales are calculated as fixed cost divided by contribution margin ratio.
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