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

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
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:

  1. Determine the break-even point in sales dollars
  2. 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. 

steps

Step by step

Solved in 2 steps

Blurred answer
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education