You are planning to set up two barbering salons with all the state-of-the-art perks at East Cantonments. The initial bill that was brought put the fixed cost at Gh¢ 2.5million. A cursory overview of the market pegs your breakeven point at 43 clients per day for the year for each OT the two salons. You are definitely sure you cannot do 43 clients a day for each salon. You are most likely to do a max of 25 clients a day for each shop. It is also clear that you cannot Increase the price per service anywhere above the current price of Gh¢ 200 it you want to attract enough clients. Your operations manager has also confirmed that the contribution margin per service cannot drop below the current Gh¢ 80 level. Your only option is to reduce the set-up cost of Gh¢ 2.5million by just enough to allow you to breakeven at 25 clients per day for each of the two shops.

What should be your target fixed cost?

Answer rating: 100% (QA)

aya To calculate the target fixed cost we can use the following fo... View the full answer