Beauty Business Financial Management and Pricing 2

Question 1

A salon owner wants to know how much profit remains after covering all operating expenses. Which figure should she look at?

Accepted Answer

Net profit

Answer

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?

Accepted Answer

60%

Answer

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?

Accepted Answer

To determine the sales needed to cover all costs

Answer

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?

Accepted Answer

Fixed costs

Answer

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:

Accepted Answer

Rental income

Answer

Booth rent collected from independent stylists is rental income to the owner.

Beauty Business Practice Test