Economics-AW270

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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 $0.40 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.

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

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  • 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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Grading Criteria Percentage
Deliverable requirements addressed; understanding of material and writer’s message and intent are clear. 40%
Calculation methods, where required, are contextually appropriate, fully explained, and presented in a manner that is easy to understand. 10%
External research incorporated in the paper, if any, supports the writer’s position properly acknowledged and cited; direct quotations may not exceed 10% of the word count of the body of the assignment deliverable (excluded title page, abstract or table of contents if used, tables, exhibits, appendices, and reference page(s).) Inclusion of plagiarized content will not be tolerated and may result in adverse academic consequences. 5%
Critical thinking: Position is well-justified; logical flow; examples provided where appropriate. 20%
Structure: Includes introduction and conclusion; proper paragraph format; reads as a polished academic paper or professional presentation, as appropriate for the required assignment deliverable. 10%
Mechanical: No spelling, grammatical, or punctuation errors. 10%
APA: Deliverable is cited properly according to the APA Publication Manual (6th ed.). 5%

 

 

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