Break even analysis Cost associated with the hair cut business will vary with the type (men, women

Question: Break even analysis

Cost associated with the hair cut business will vary with the type (men, women, and combination).

Labor Per Week: All employees hired by the business operation for a (men or women only) will work for 40 hours per week, at a rate of $8.00 per hour. For the combination business, the rate will be $9.00 per hour for all employees. This is due to the fact that more people are needed and lead persons will be required and paid at a higher rate.

Real Estate: The business will expense their real estate with a bank loan. Building cost will be approximately $80 per square foot. The lot price will vary with the type of hair cut business. Finance the building and the lot at 7% interest with a 15-year loan.

Special Equipment: Chairs, mirrors, shelves, rinsing devices, cash register, computer and other equipment will be needed. Assume that the money for the equipment will also be borrowed “up front.” The interest on the equipment will be 7.5% for a 10-year loan.

Insurance, Tax, Utilities & Trash Removal: Other bills will be incurred with the business. These will vary with the size and number of employees. The taxes will mostly be property taxes.

The following table contains information to calculate the “start up costs.” All costs are in dollars.

	Unit Type	Men Only	Women Only	Men & Women
Building	Square Feet	600	650	1000
Lot Cost	Dollars / One time	45,000	45,000	50,000
Equipment	Dollars / One time	30,000	40,000	50,000
Utilities	Dollars / Month	800	800	1,000
Insurance/tax	Dollars / Month	400	500	550
Employees	Number	4	5	10
Trash Removal	Dollars / Month	100	125	200

Some costs vary with the number of Hair Cuts sold. These costs are expressed in dollars and reside in the following table.

	Unit Type	Men Only	Women Only	Men & Women
Neck Wrap	Per Hair Cut	0.02	0.02	0.02
Towel	Per Hair Cut	0.05	0.10	0.08
Spray / Tonic	Per Hair Cut	0.04	0.34	0.30
Performance Bonus	Per Hair Cut	1.50	1.50	1.50

Although you will determine the correct price based on the survey, assume the selling price will be $13 for the men, $17 for the women, and $15 for the combination of men and women.

Generate the number of hair cuts that will need to be sold on a yearly, monthly, and daily basis to break even in these three scenarios. Which has the lower break even number? Do these overall numbers seem achievable to you?

Price: $2.99

Solution: The solution file consists of 4 pages
Deliverables: Word Document