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In the month of June, Jose Hebert’s Beauty Salon gave 4,125 haircuts, shampoos, and permanents at...

In the month of June, Jose Hebert’s Beauty Salon gave 4,125 haircuts, shampoos, and permanents at an average price of $40. During the month, fixed costs were $16,500 and variable costs were 75% of sales.

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Compute the margin of safety in dollars and as a ratio.

Margin of safety $ 41259
Margin of safety ratio 25%

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Expert Solution

Solution

Margin of safety sales $           99,000.00
Margin of safety ratio 60.00%

Working no 1

A Actual Sales $        165,000.00
B Breakeven sales(see working 2) $           66,000.00
C=A-B Margin of safety sales $           99,000.00
D=C/A Margin of safety ratio 60.00%

.Working no 2

A Sale Price per unit $                   40.00
B Variable Cost per Unit (40 x 75%) $                   30.00
C=A - B Unit Contribution $                   10.00
D Total Fixed cost $           16,500.00
E=D/C Breakeven point in units                       1,650
F= E x A Breakeven in sales dollars               66,000.00

ekkarill92 answered 1 year ago
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