# E22-5, Compute contribution margin, break-even point, and margin of safety. In the month of June, Bonita Beauty Salon gave 2,700 haircuts, shampoos,…

E22-5, Compute contribution margin, break-even point, and margin of safety.
In the month of June, Bonita Beauty Salon gave 2,700 haircuts, shampoos, and permanents at an
average price of \$30 During the month, fixed costs were \$18,000 and variable costs were
70% of sales.

Instructions:
(a)(1) Determine the contribution margin in dollars.

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Total Sales \$81,000
Variable Cost 56,700
Contribution margin in dollars \$24,300

(a)(2) Determine the contribution margin as a ratio.

Contribution margin in dollars
Total Haircuts Given
Per unit Contribution margin

(b)(1) Using the contribution margin technique, compute the breakeven point in dollars.

Breakeven sales (in dollars): Amount = Formula
Percentage

(b)(2) Using the contribution margin technique, compute the breakeven point in units.

Breakeven sales (in units): Amount = Formula units
Amount

(c)(1) Compute the margin of safety in dollars.

Margin of safety (in dollars): Amount – Amount = Formula

(c)(2) Compute the margin of safety as a ratio. (Rounded to a whole percentage.)

Margin of safety (ratio): Amount ÷ Amount = Formula

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