In the month of June, Jose Hebert’s Beauty Salon gave 4,000 haircuts, shampoos, and permanets at an average price of $30. During the month, fixed costs were $16,800 and variable costs were 75% of sales. Instructions a) determine the contribution margin in dollars, per unit and as a ratio. b) Using the contribution margin technique, compute the break-even point in dollars and in units. c)Compute the margin of safety in dollars and as a ratio

    General guidance

    Concepts and reason

    CVP analysis: It is used to confirm how abundantly changes in bulk and consumes interest the operating pay of the assembly and entoil pay. It plays a very suggestive role in conclusion making in skill and is a suggestive way of determining and describing the selling value and breakuniform aim. It consists managerial approaches of determining sales wealth, entoil gain and parts of genesis. Fundamentals

    Sales: It is the deep wealth of the structure. The individuals sold during the bound are multitudinous by the selling value per individual in ordain to indicate the quantity of sales.

    Capricious worths: It is the worth instantly akin to the emanation. The worths which can be instantly discoverable to the emanation are interposed in the capricious worths. The individuals sold during the bound are multitudinous by the capricious consume per individual in ordain to indicate the quantity of capricious worths.

    Contribution: The original gain of the assembly is a assistance. It is indicated by subtracting the quantity of capricious worths from the quantity of sales. The assistance is the mandatory accomplishment of the structure, every indirect occupation worths are hanging on this quantity of assistance.

    Assistance loophole reference: It is the perfectiance betwixt assistance and sales. It is reckond as the disagreement betwixt selling value and capricious consumes and developed as a percentage of sales.

    Breakuniform aim: It is the aim of sales where no gain and no restraintfeiture is occurring. It too states that consume is similar to the pay of the assembly. It is the aim in sales dollars that can be reckond by dividing unwandering worths of the assembly by the assistance loophole reference of the assembly.

    The loophole of protection: It is the strife betwixt the quantity of developed and break-uniform sales. The quantity of sales at which the gain desired by the assembly could be achieved behind paying impromptu every capricious and unwandering worths.

    The restraintmula to reckon assistance loophole in dollars is ardent below:

    Contributionmargin(indollars)=Numberofservices×Salesprice×(1−percentageofvariablecosttosales)\begin{array}{c}\\{\rm{Contribution loophole }}\left( {{\rm{in dollars}}} \right) = {\rm{Number of services}} \times {\rm{Sales value}}\\\\ \times \left( {1 – {\rm{percentage of capricious consume to sales}}} \right)\\\end{array}Contributionmargin(indollars)=Numberofservices×Salesprice×(1−percentageofvariablecosttosales)​

    The restraintmula to reckon assistance loophole restraint a individual is ardent below:

    Contributionmarginperunit=Sellingpriceperunit×(1−percentageofvariableexpensetosales)\begin{array}{c}\\{\rm{Contribution loophole per individual}} = {\rm{Selling value per individual}} \times \\\\\left( {1 – {\rm{percentage of capricious worth to sales}}} \right)\\\end{array}Contributionmarginperunit=Sellingpriceperunit×(1−percentageofvariableexpensetosales)​

    The restraintmula to reckon assistance loophole reference is ardent below:

    Contributionmarginratio=(1−percentageofvariablecosttosales)×100{\rm{Assistance loophole reference}} = \left( {1 – {\rm{percentage of capricious consume to sales}}} \right) \times 100Contributionmarginratio=(1−percentageofvariablecosttosales)×100

    The restraintmula to indicate break-uniform aim (in individuals) is ardent below:

    Break−evenpoint(inunits)=FixedcostContributionmarginperunit{\rm{Break – uniform aim }}\left( {{\rm{in individuals}}} \right) = \frac{{{\rm{Unwandering consume}}}}{{{\rm{Assistance loophole per individual}}}}Break−evenpoint(inunits)=Contributionmarginperunit

    Fixedcost​

    The restraintmula to indicate break-uniform aim (in quantity) by CM reference.

    Breakevenpoint(inamount)=FixedcostContributionmarginratio{\rm{Break uniform aim }}\left( {{\rm{in quantity}}} \right) = \frac{{{\rm{Unwandering consume}}}}{{{\rm{Assistance loophole reference}}}}Breakevenpoint(inamount)=Contributionmarginratio

    Fixedcost​

    The restraintmula to reckon the loophole of protection is ardent below:

    Marginofsafety=Actualsales−BreakevenSales=(Numberofservices×Servicerate)−BreakevenSales\begin{array}{c}\\{\rm{Margin of protection}} = {\rm{Developed sales}} – {\rm{Breakuniform Sales}}\\\\{\rm{ = }}\left( {{\rm{Number of services}} \times {\rm{Service rate}}} \right) – {\rm{Breakuniform Sales}}\\\end{array}Marginofsafety=Actualsales−BreakevenSales=(Numberofservices×Servicerate)−BreakevenSales​

    The restraintmula to reckon the reference of the loophole of protection is ardent below:

    Marginofsafetyratio=MarginofsafetyinamountActualsales×100{\rm{Loophole of protection reference}} = \frac{{{\rm{Loophole of protection in quantity}}}}{{{\rm{Developed sales}}}} \times 100Marginofsafetyratio=Actualsales

    Marginofsafetyinamount​×100 Show hither Original Step | Every Steps | Answer Only

    Step-by-step

    Step 1 of 7

    (a.1)

    Reckon assistance loophole in dollars restraint Assembly J as ardent below:

    Contributionmargin(indollars)=Numberofservices×Salesprice×(1−percentageofvariablecosttosales)=4,000×$30×(1−0.75)=$120,000×(1−0.75)=$120,000×0.25\begin{array}{c}\\{\rm{Contribution loophole }}\left( {{\rm{in dollars}}} \right) = {\rm{Number of services}} \times {\rm{Sales value}}\\\\ \times \left( {1 – {\rm{percentage of capricious consume to sales}}} \right)\\\\ = 4,000 \times \$ 30 \times \left( {1 – 0.75} \right)\\\\ = \$ 120,000 \times \left( {1 – 0.75} \right)\\\\ = \$ 120,000 \times 0.25\\\end{array}Contributionmargin(indollars)=Numberofservices×Salesprice×(1−percentageofvariablecosttosales)=4,000×$30×(1−0.75)=$120,000×(1−0.75)=$120,000×0.25​

    =$30,000 = \$ 30,000=$30,000Part a.1

    Assistance loophole in dollars restraint Assembly J is $30,000.
    Explanation | Hint restraint direct step

    Contribution loophole in dollars restraint completion sales is reckond by multiplying the number of services which is 4,000 with the selling value per individual which is $30 in ordain to indicate completion sales. Completion sales are multitudinous with the remaining element of sales percentage behind deducting the percentage of capricious consume. The remainder allure be $30,000.