Renee Tyne, now retired, owns the Downtown Beauty Shop. She employs five (5) stylists and pays each
Question:
Renee Tyne, now retired, owns the Downtown Beauty Shop. She employs five (5) stylists and pays each a base rate of $500 per month. One of the stylists serves as the manager and receives an extra $300 per month. In addition to the base rate, each stylist also receives a commission of $3 per haircut. A stylist can do as many as 20 haircuts a day. The Downtown Beauty Shop is open 24 days a month. You can safely ignore income taxes.
Other costs are incurred as follows:
Advertising | $ | 200 | per month |
Rent | $ | 400 | per month |
Beauty Supplies | $ | 0.90 | per haircut |
Utilities | $ | 175 | per month plus $0.35 per haircut |
Magazines | $ | 25 | per month |
Cleaning Supplies | $ | 0.15 | per haircut |
Renee currently charges $8 per haircut.
Required:
(a) Compute the break-even point in (1) number of haircuts, (2) total sales dollars, and (3) as a percentage of capacity.
(b) In July, 1,400 haircuts were given. Compute the operating profits for the month.
(c) Renee wants a $2,160 operating profit in August. Compute the number of haircuts that must be given in order to achieve this goal.
(d) If 1,500 haircuts are given in August, compute the selling price that would have to be charged in order to have $2,160 in operating profits.
Managerial Accounting Tools for Business Decision Making
ISBN: 978-1118856994
4th Canadian edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, Ibrahim M. Aly