Unit 3 – Individual Project
American InterContinental University
ACCT310 – Managerial Accounting

Abstract
This paper will provide explanation of contribution margins, a determination of an annual break-even point, and operating income of Andre’s Hair Styling with calculations supporting answers.
All calculations of business are based on each barber being paid $9.90 per hour working 40 hours per week and 50 weeks per year. Rent and other expenses equal $1,750.00 per month. Expenses include forty cents per client for shampoo, while services include haircuts priced at twelve dollars each. A revised or new contribution method, where barbers will receive wages of $4.00 per hour plus $6.00 per haircut.

Contribution margin is revenue minus variable expenses. Meaning how much a company’s revenue will contribute to fixed expenses and net income. The contribution margin is also useful in determining a company’s break-even point (AccountingCoach.com, n.d.). At Andre’s Hair Styling haircuts are $12.00 with a shampoo expense of $ .40, while barber compensation is a fixed cost. Contribution margin per head Hair cut price – Shampoo expense $12 - $.40 = $ 11.60 per head
When planning a company’s future, management must plan to predict the volume of activity, the cost incurred sales to be made, and profits to be received. An important tool to accomplish this is cost-volume-profit (CVP) analysis. This simply involves computing sales level at which the company earns an income or incurs a loss, a break-even point. The CVP analysis helps to predict cost changes and sales levels affect income (Wild & Shaw, n.d.). This break-even point is all fixed cost recuperated when the company is making a profit or losing profit and actually at which point the company starts