Contributing Margin = The Cost of the haircut minus the Variable Cost (which is the shampoo)
$12-$0.40 =$ 11. 6
Contributing Margin will be $11.6
- To determine the annual break-even point in the number of the given haircuts
The Break even point will be (gains = losses)
Formula:
Evidently, the Total Fixed Costs / Contributing Margin = The Break-even Point
In the case of 5 (employees) *$9.90* 50 *40= *$99, 000 + 1750 which is the (monthly costs)*12 (months)= will give $120,000
Therefore; $120,000 divide by 11.6 =10,334.83 which is the total Number of Haircuts needed to break even.
