Beauty Business Financial Management and Pricing 2 — Questions and Answers
Question 1: A salon owner wants to know how much profit remains after covering all operating expenses. Which figure should she look at?
- Gross revenue
- Net profit (Correct answer)
- Total sales
- Service ticket average
Correct answer: Net profit
Net profit is what remains after all operating expenses are deducted from revenue.
Question 2: If a haircut costs $18 in product, labor, and overhead and is priced at $45, what is the gross profit margin per service?
- 40%
- 50%
- 60% (Correct answer)
- 70%
Correct answer: 60%
Gross profit is $27 on a $45 price, which equals 60%.
Question 3: What is the primary purpose of a break-even analysis for a new salon?
- To set employee schedules
- To determine the sales needed to cover all costs (Correct answer)
- To calculate tips
- To choose retail brands
Correct answer: To determine the sales needed to cover all costs
Break-even analysis identifies the sales volume required to cover fixed and variable costs.
Question 4: Rent, insurance, and salaried staff are examples of what type of cost?
- Variable costs
- Fixed costs (Correct answer)
- Marginal costs
- Discretionary costs
Correct answer: Fixed costs
Fixed costs stay the same regardless of how many services are performed.
Question 5: A booth renter pays a weekly flat fee to the salon owner. This income for the owner is best classified as:
- Service revenue
- Rental income (Correct answer)
- Retail sales
- Commission
Correct answer: Rental income
Booth rent collected from independent stylists is rental income to the owner.
Question 6: Which pricing strategy sets service prices based on what competitors in the area charge?
- Cost-plus pricing
- Competitive pricing (Correct answer)
- Value-based pricing
- Penetration pricing
Correct answer: Competitive pricing
Competitive pricing benchmarks prices against similar local salons.
Question 7: Why should a salon track its average service ticket over time?
- To measure revenue per client visit and spot growth opportunities (Correct answer)
- To calculate sales tax owed
- To schedule cleaning
- To order more towels
Correct answer: To measure revenue per client visit and spot growth opportunities
The average ticket shows how much each client spends and highlights upselling potential.
Beauty Business Financial Management and Pricing 2
A salon owner wants to know how much profit remains after covering all operating expenses.
Which figure should she look at?