Question 1
Mounce's Market operates with a 20% contribution margin. If Mounce's sales decrease by $10,000, operating income will decrease by
◦ $200.
◦ $2,500.
◦ $2,000.
◦ $250.
Question 2
Jenny's Cutting Station offers a new concept in haircuts; low cost and very quick. Set in a local mall, Jenny's offers 15-minute haircuts for harried shoppers who do not have time for lengthy appointments. To ensure that the clients are in and out quickly, she schedules her 5 employees based on expected client traffic. Each of the employees is paid $1,200 per month, with part of their pay coming from client tips. Jenny pays rent and overhead costs of $2,000 per month on the facility. Because of the quick nature of the service, Jenny doesn't have time to clean combs in between clients, so she uses a new comb for each customer, at a cost of $0.55 each. She also provides shampoo and conditioner for each client at a cost of $0.95 per client. The average price for a haircut is $12. Jenny pays herself $5,000 per month. What is Jenny's contribution margin per haircut?
◦ $10.50
◦ $11.45
◦ $10.20
◦ $11.05
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Cost = $99.49; Rate of markup based on cost = 32%. Find the markup and selling price.