Exercise 1 - In the month of June, Paula's Beauty Salon gave 3,5000 haircuts, shampoos, and permanents at an average price of $30. During the month, fixed costs were $16,800 and variable costs were 80% of sales.
(a) Determine the contribution margin in dollars, per unit and as a ratio.
(b) Using the contribution margin technique, compute the break-even point dollars and in units.
(c) Compute the margin of safety in dollars and as a ratio.
Exercise 2 - Tiger Golf Accessories sells golf shoes, gloves, and a laser-guided range-finder that measures distance. Shown below are unit cost and sales data.
Pairs of Pairs of Range-
Shoes Gloves Finder
Unit sales price $100 $30 $250
Unit variable costs 60 10 200
Unit contribution margin $ 40 $20 $ 50
Sales mix 40% 50% 10%
(a) Compute the breakeven point in units for the company.
(b) Determine the number of units to be sold at the break-even point for each product line.
(c) Verify that the mix of sales units determined in (b) will generate a zero net income.