Andre’s Hair Styling (Graded A+) - use as a guide only - 30346

Assignment Type: Individual Project   Deliverable 
Length: 1-2 pages and Excel Spreadsheet    


Consider the following scenario:

Andre has asked you to evaluate his business, Andre’s Hair Styling. Andre has 
five barbers working for him. (Andre is not one of them.) Each barber is paid 
$9.90 per hour and works a 40-hour week and a 50-week year, regardless of the 
number of haircuts. Rent and other fixed expenses are $1,750 per month. Hair 
shampoo used on all clients is .40 per client. Assume that the only service 
performed is the giving of haircuts (including shampoo), the unit price of which 
is $12. Andre has asked you to find the following information.

1. Find the contribution margin per haircut. Assume that the barbers' 
   compensation is a fixed cost. Show calculations to support your answer.

1. Determine the annual break-even point, in number of haircuts. Support your 
   answer with an appropriate explanation. Show calculations to support your 
   answer.

1. What will be the operating income if 20,000 haircuts are performed? Show 
   calculations to support your answer.

1. Suppose Andre revises the compensation method. The barbers will receive $4 
   per hour plus $6 for each haircut. What is the new contribution margin per 
   haircut? What is the annual break-even point (in number of haircuts)? Show 
   calculations to support your answer.

A+++++++++