Question

You run a nail salon. Fixed monthly cost is $5,699.00 for rent and utilities, $6,473.00 is spent in salaries and $1,274.00 in insurance. Also every customer requires approximately $3.00 in supplies. You charge $99.00 on average for each service. You are considering moving the salon to an upscale neighborhood where the rent and utilities will increase to $10,510.00, salaries to $6,054.00 and insurance to $2,016.00 per month. Cost of supplies will increase to $7.00 per service. However you can now charge $145.00 per service. At what point will you be indifferent between your current location and the new location

Answer 1

The answer is "151".

Step-by-step explanation:

Indifference measurement Niveau between the current position and proposed position:

`\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \left\begin{array}{ccc} &Accessible& Submitted\\\end{array}\right \\\\\left\begin{array}{ccc}Sale&106& \ \ \ \ \ \ \ \ \ \ \ \ 155 \\ less: Variable \ cost&2& \ \ \ \ \ \ \ \ \ \ \ \ 7 \\ \ contribution&1 04 & \ \ \ \ \ \ \ \ \ \ \ \ 148 \end{array}\right \\`

`\left\begin{array}{ccc}\text{Fixed costs: Rent and utilities}& 5,414 & 11,226 \\salaries& 6,175 & 6,167\\insurance &1,162 &2,006 \\ Total&12,751 &19,399 \end{array}\right \\\\`

`\text{Level of indifference} = \frac{\text{Fixed cost} }{\text{ contribution per unit}}`

`= ((19,399- 12,751))/((148- 104 )) \\\\ =(6,648)/(44) \\\\ = 151`