Question

In the month of June, Jose Hebert's Beauty Salon gave 3,900 haircuts, shampoos, and permanents at an average price of $ 30. During the month, fixed costs were $ 16,600 and variable costs were 75% of sales. Determine the contribution margin in dollars, per unit and as a ratio. (Round contribution margin per unit and contribution margin ratio to 2 decimal places, eg. 5.25& 10.50.) Contribution margin Contribution margin perunit$ Contribution margin ratio eTextbook and Media Using the contribution margin technique, compute the break-even point in dollars and in units. (Round answers to O decimal places, eg. 1,225.) Break-even point $ Break-even point units eTextbook and Media Compute the margin of safety in dollars and as a ratio. (Round answers to O decimal places, eg. 1,225.) Margin of safety Margin of safety ratio

Answer 1

Contribution margin = $29,250

Contribution margin per unit = $7.50

Contribution margin ratio = 25%

Break even point = $66,400

Break even point = 2213 Units

Margin of safety = $50,600

Margin of safety ratio = 43%

Working notes :

Average selling price = $30

Variable cost = $30 * 75% = $22.50

Contribution Margin per unit = selling price per unit - variable cost per unit

= $30 - $22.50 = $7.50

Contribution Margin Ratio = contribution margin per unit * No. of haircuts

= $7.50 * 3,990 = $29,250

Sales = 3,900 * $30 = $117,000

Variable cost = $87,750

Contribution margin percent = contribution margin/sales

= $29,250/$117,000 = 25%