In the month of June, Jose Hebert\'s Beauty Salon gave 3,400 haircuts, shampoos,

Question

In the month of June, Jose Hebert's Beauty Salon gave 3,400 haircuts, shampoos, and permanents at an average price of S30. During the month, fixed costs were $18,500 and variable costs were 70% of sales. Determine the contribution margin in dollars, per unit, and as a ratio. (Round the contribution ratio to O decimal places, e.g. 27%, contribution margin per unit to 2 decimal places, e.g. 15.25 and answer to the nearest whole dollar, e.g. 5,275.) Using the contribution margin technique, compute the break-even point in dollars and in units. Compute the margin of safety in dollars and as a ratio. (Round the Margin of Safety ratio to 0 decimal places, e.g. 27%.) Hall Company had sales in 2014 of $I,322,160 on 62,960 units. Variable costs totaled $692,560, and fixed costs totaled $509,400. A new raw material is available that will decrease the variable costs per unit by 24% (or $2.64). However, to process the new raw material, fixed operating costs will increase b> $64,210. Management feels that one-half of the decline in the variable costs per unit should be passed on to customers in the form of a sales price reduction. The marketing department expects that this sales price reduction w II result in a 3% Increase in the number of units sold. Prepare a CVP income statement for 2014, assuming the chances have not been made. Prepare a CVP income statement for 2014, assuming the changes are made as described.

Explanation / Answer

Particulars Formula Amount Units Sales (3400*30) 102000 30 Variable cost 70% of sales 71400 21 Contribution Sales - variable cost 30600 9 Contribution margin contribution /Sales 30.00% 30.00% Contribution margin ratio = Pv ratio contribution /Sales 0.30 0.30 Fixed expenses 18500 18500 Net income 12100 Break even sales dollars Fixed expense/Pv ratio 61666.6667 Break even units Fixed /Contribution per unit 2055.5556 Margin of safety Sales - break even sales 40333.3333 Margin of safety units 1344.4444 Particulars Amount Per unit Units Sales 1344327 19.77 67996.8 Variable cost 568453.248 8.36 67996.8 Contribution 775873.75 11.410445 Fixed expenses 64210 Net income 711663.75

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