Beauty Business Financial Management and Pricing 3 — Questions and Answers
Question 1: A stylist earns 45% commission on a $60 color service. How much does she earn from that service?
- $24
- $27 (Correct answer)
- $30
- $33
Correct answer: $27
45% of $60 is $27.
Question 2: What financial statement shows a salon's revenues and expenses over a period of time?
- Balance sheet
- Income statement (Correct answer)
- Cash flow forecast
- Inventory log
Correct answer: Income statement
The income statement (profit and loss) reports revenue and expenses over a period.
Question 3: A salon buys shampoo at $8 wholesale and sells it at $16 retail. What is the markup?
- 50%
- 75%
- 100% (Correct answer)
- 125%
Correct answer: 100%
An $8 increase on an $8 cost is a 100% markup.
Question 4: Which of the following is a variable cost for a salon?
- Monthly rent
- Business insurance
- Color and developer used per client (Correct answer)
- Owner's fixed salary
Correct answer: Color and developer used per client
Product used per service rises and falls with client volume, making it variable.
Question 5: What is the main benefit of offering prepaid service packages to clients?
- It eliminates all taxes
- It improves cash flow and client retention (Correct answer)
- It removes the need for inventory
- It raises product costs
Correct answer: It improves cash flow and client retention
Prepaid packages bring cash in early and encourage repeat visits.
Question 6: A salon's overhead is $12,000 per month and its average service profit is $30. How many services must it perform monthly to cover overhead?
- 300
- 400 (Correct answer)
- 500
- 600
Correct answer: 400
$12,000 divided by $30 equals 400 services.
Question 7: Value-based pricing sets a service price primarily according to:
- The cost of supplies only
- The perceived value and results to the client (Correct answer)
- The cheapest local competitor
- The stylist's seniority alone
Correct answer: The perceived value and results to the client
Value-based pricing reflects the worth and outcome clients place on the service.
Beauty Business Financial Management and Pricing 3
A stylist earns 45% commission on a $60 color service.
How much does she earn from that service?