Kelly owns a salon. She gives her hairdresser two options for using her facility, equipment and salon products. They can pay Kelly a flat rental of $1600 per month or

2) They can pay her $5 per haircut plus 10% their revenue. The hairdresser charge their customers $30 per haircut. The hairdresser incur no other expenses.

1. At what point (number of haircuts per month) will the hairdressers be indifferent between the two payments options?

Begin by calculating the indifferent point: FC=Fixed costs, VCU= Variable cost per unit.

VCU (Option 1) x units +FC (Option1) = VCU (Option2) x units) + FC (Option2)

Answer rating: 100% (QA)

Giving the following information Option 1 they can ... View the full answer