Compute contribution margin, break-even point, and margin of safety

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In the month of June, Jose Herbert’s Beauty Salon gave 4,000 haircuts, shampoos, and permanents at an average price of $30. During the month, fixed costs were $16,800 and variable costs were 75% of sales.

Instructions:

a. Determine the contribution margin in dollars, per unit and as a ratio.

b. Using the contribution margin technique, compute the break-even point in dollars and in units.

c. Compute the margin of safety in dollars and as a ratio.

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