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Essay / Research Paper Abstract
This 4 page paper uses figures provided by the student to demonstrate the way that the contribution margin, break even point and the operating income pr profit for a set level of production. All calculations are shown. The bibliography cites 3 sources.
Page Count:
4 pages (~225 words per page)
File: TS14_TEcontbarb.doc
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Unformatted sample text from the term paper:
(Chadwick, 2004). The variable costs are those which change with each additional unit of goods or service provided (Watts, 2007). This is referred to as the contribution level as
it is the revenue achieved from each unit sold that will contribute to paying the fixed (or overhead) costs and when these are covered will contribute to the profits (Chadwick,
2004). In the case given we are told that there is revenue per haircut of $12, and that the only variable cost is the $0.40 shampoo, this gives a contribution
level of $11.60 Table 1 Contribution per haircut Revenue per haircut $12.00 Shampoo per haircut $0.40 Contribution $11.60 Question 2 Knowing the contribution level is the first stage in
calculating the break even point. The next consideration is the calculation of the total fixed costs. The contribution from the sale of each unit will be added together and the
point at which the total overheads are covered by the contribution will be the breakeven point. So we need to calculate the fixed costs.
The first fixed cost is labor. We have the hourly rate, the number of hours worked each week, the number of weeks worked per year and the number
of barbers employed all of which need to be multiplied together, this gives us an annual wage bill of $99,000. Table 2 Annual wage cost Hourly rate 9.90 Hours
per week 40.00 Weekly wage per barber 396.00 Weeks per year 50.00 Annual wage per barber 19,800.00 Number of barbers 5.00 Total barbers wages per year 99,000.00 There are other
fixed costs of the rent and associated costs which is given as $1,750 per month, this gives us annual costs of 21,000 Table 3 Annual rent cost Rent per month
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