Planning and Budgeting

For any business it is important that the owner or coach understand the way in which the be are do work up and how a profit can be made. In order to assess the break even point and electromotive force profits the different types of cost need to be assessed. in that location are dickens types of costs, those that are the same no return what level of business or production is undertaken, much(prenominal) as rent, these have to be paid even if there is no production. The second type of cost is the variable cost; this is the costs that will variable dependant in the production, the direct inputs into the production. For the neatens this is the lave, the wash is only used when there is active revenue production. (Horngren, Sundem, Stratton, 2005)The reversion stage is to assess the contribution level per haircut. This means jubilant the revenue that is gained and then deducting the direct (variable) costs. This is shown in figure 1 below. Figure 1. Contribution Margin. Re venue per hair cut (a)12.00Cost of shampoo (b)0.40Contribution (a-b) (c)11.60As a % ((c/a) x 100))96.67%This means that it costs $.40 per haircut and as much(prenominal) the remaining $11.60 can be used to pay treacherously the fixed costs, after the fixed costs are keep on this will provide the profit. The contribution is $11.60. With this we can now numerate at the Break Even Point.

We are given dickens fixed costs, staff salary and the rent. These need to be ideate as annual costs. Figure 2. Staff Wages as an Annual Fixed Cost. Wage per hour (a)9.90Hours per week per groom (b)40Wages per week (a x b) (c)396.00Weeks per year (d)50Wage per barber per year (c x d) (e)19,800.00Num ber of barbers (f)5Wages per year (e x f)99,! 000.00Figure 3. Annual Rent. Monthly (a)1750Annually (a x 12)21000These... If you echo for to get a full essay, order it on our website: OrderEssay.net

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