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

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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.

Find the contribution margin per haircut. Assume that the barbers’

compensation is a fixed cost. Show calculations to support your

answer.

Determine the annual break-even point, in number of haircuts.

Support your answer with an appropriate explanation. Show

calculations to support your answer.

What will be the operating income if 20,000 haircuts are performed?

Show calculations to support your answer.

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.

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