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Institutional Affiliation - Essay Example

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Summary
Contribution = Unit selling price – Variable Cost
= $12 - $0.40
= $11.60
Therefore, contribution is margin per haircut is $11.60…
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Institutional Affiliation
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Finance and Accounting al Affiliation) Contribution = Unit selling price – Variable Cost = $12 - $0.40 = $11.60 Therefore, contribution is margin per haircut is $11.60. Break-even point = Fixed cost / contribution Fixed cost = (9.90 * 5 * 40 * 50) + (1750 * 12) = $120000 Break-even point = 120000 / 11.60 = 10345 units Break-even point is 10345 units Operating Income Calculation: Revenue = ($12 * 20000) = $240000 Less: Variable Cost = ($0.4 * 20000) = $8000 Fixed Cost = $120000 Operating Income = $ 112000 The operating income is $112000 Revision of compensation method: New Contribution = $12 – ($6 +$0.4) = $5.6 The new contribution margin per hair cut is $5.

6 Break-point = (21000 + (4*5*40*50)) / 5.6 =10893 The annual break-even point is 10893 units References Epstein, M., & Lee, J. (2011). Advances in management accounting. Bingley, UK: Emerald. Horngren, C. (1999). Management and cost accounting. London: Prentice Hall Europe.

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