Planning and Budgeting

For any business it is important that the owner or busbar understand the way in which the be are stir up and how a profit can be made. In order to assess the break even point and latent profits the different types of be 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 commencement stage is to assess the contribution level per haircut. This means winning the revenue that is gained and then deducting the direct (variable) costs. This is shown in figure 1 below. Figure 1. Contribution Margin. Revenue per hair cut (a)12.00Cost of lave (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 ill-advised the fixed costs, after the fixed costs are sulk this will provide the profit. The contribution is $11.60. With this we can now way out at the Break Even Point. We are given twain fixed costs, staff salary and the rent. These need to be puzzle out 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)19,800.00Number of barbers (f)5Wages per year (e x f)99,000.00Figure 3. Annual Rent. Monthly (a)1750Annually (a x 12)21000These... If you handle for to get a full essay, order it on our website: OrderCustomPaper.com

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