Ht Hair Styling in Singapore

ACCT 605 Assignment – Submit online and bring a copy to class for reference.    

HT Hair Styling in Singapore has five barbers (HT is not one of them).  HT currently compensates each barber by paying them $SD9.90 per hour ($SD = Singapore Dollar) .  The barbers work 40 hours per week for 50 weeks each year.  Their current compensation structure ensures that they are paid each week regardless to the number of hair cuts performed by an individual barber.  The manager will not send any one home if there is low or no demand because they want to be staffed to handle surge capacity.  Rent and other fixed overhead expenses such as insurance, common area maintenance (CAM) charges are $SD1,750 per month.  The variable cost of supplies is estimated at $SD 1 per haircut (HC).  The only service performed is haircuts (HC).  They do not sell any other services (manicure’s, etc) or products (shampoo, hair jells, etc).  The unit selling price is set at $SD 13 per haircut.   Forecasted hair cuts for the coming year are 20,000 hair cuts.  The actual volume of hair cuts can vary significantly based on the economy and other factors (style trends).  There were times when the volume drop or increased by 60%.

Current Costs =         1,750 CAM

                        1,980 Wages/Salaries

HC Revenues =         260,000        with 60% drop 104,000        increase 416,000

Net Income                256,270        100,270                        412,270

HT Hair Styling’s retained the services of Human Resource Management Consulting firm (HRMC).  HRMC provided recommendations related to changes in the barber compensation structure (how barbers are paid).  In the first alternative, HRMC recommended changing the compensation structure which is was intended to provide an incentive to the barbers.  Under this proposed compensation plan, each barber receives $SD 4 per hour plus a commission of $SD 6 per haircut.  

Current Costs =         1,750 CAM

                        800 Wages/Salaries

                        Commission 120,000        drop 48,000        increase 192,000

HC Revenues =         260,000        with 60% drop 104,000        increase 416,000

Net Income                137,450        54,250                                222,250

The other alternative HRMC recommended was pay barbers solely based on a commission of $SD 7 per haircut and discontinue the hourly wage.

Current Costs =         1,750 CAM