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At $12 a piece, our new Sales price is $240k, and our new variable cost is $8k. As we saw in question 1, we now know that the contribution margin is ($240k - $8k =) $232k. If we subtract from that the fixed cost (which haven't changed since question 3, $120k), we get a total net income of $112k (please see calculations below):
units 20,000... displayed 300 characters
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If we subtract from that the fixed cost (which haven't changed since question 3, $120k), we get a total net income of $112k (please see calculations below):
units 20,000.00
sales $240,000.00 = 20k cuts * $12 each
variable cost $ 8,000.00 = 20k cuts * $0.40 for shampoo
cont margin $232,000.00 = $240k sales - $8k variable costs
fixed cost $120,000... displayed next 300 characters
One could say that the price per unit increase or decreases the same as the contribution margin per unit so long as the variable costs stay the same.
In conjunction with the contribution margin, there is the contribution margin ratio...
Weaknesses are internal characteristics that have the potential to limit accomplishment of mission and objectives. Weaknesses may be so important that they need to be addressed before any further strategic planning steps are taken...
Although this would increase the demand, the increase is not enough to raise sales to the level pre-change. However, at the same time, the increase in hours will increase the variable costs...
Operating income = total revenues ? total cost. Total revenue is 20,000 (haircuts) * 12 (months) = 240,000. Total cost is total fixed costs ? variable costs...
