Question

Style Inc. is a hair care studio that specializes in haircuts and entertainment. During a haircut, the customer receives a beverage of their choosing and watches television or chooses to listen to music. Style Inc. is working on understanding its costs and has created the following list of costs for you. You can ignore tips in this analysis because Style Inc. does not allow its customers to tip the hair stylist; ignore any other costs that are not mentioned here.

• Each haircut costs the customer $55
• Style Inc. pays its employees $20 per haircut
• The subscription to the television service customers watch during their haircut is $250/month
• Beverages cost $2/each, and every customer gets a beverage during their haircut
• The rent on the studio is $4,000/month
• The manager of the studio earns a fixed fee of $2,000/month

Question: How many haircuts does Style Inc. need to have in order to break even for the month?

Answer 1

Answer is rounded off to whole number

189 Haircuts are needed per month for Break even point Answer Break even point in Haircuts Monthly Fixed cost $6,250 Contribution margin $33 (per customer) 189 $55 Working notes: Contribution margin Price charge Variable cost Employee cost Beverages cost Total variable cost Contribution margin $20 $2 $22. $33 Monthly Fixed cost Magazine subscription Rent cost Manager fees Total Fixed cost $250 $4,000 $2,000 $6,250