Chapter 6, Problem 6.2E

In the month of June, Jose Hebert’s Beauty Salon gave 4,000 haircuts, shampoos, and permanents at an average price of $30. During the month, fixed costs were $16,800 and variable costs were 75% of sales.

Instructions

(a) Determine the contribution margin in dollars, per unit and as a ratio.

(b) Using the contribution margin technique, compute the break-even point in dollars and in units.

(c) Compute the margin of safety in dollars and as a ratio.