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A barber asked me to evaluate his business. He has five barbers working for him. Each barber is paid $4 per hour plus $6 for each haircut and works 40hrs week and a 50 week year. Rent and other fixed expenses ($1,750) per month. What is the contribution margin per haircut? What is the annual break-even point (in number of haircuts)?
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His fixed expenses for the year are $1750 X 12 = $21,000. His labor expense for the year is 2000 hours X $4 X 5 barbers = $40,000. This makes a total of $61,000. But whatever he charges per haircut …
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