Question

Carla Vista Diesel owns the Fredonia Barber Shop. He employs 7 barbers and pays each a base rate of $1,310 per month. One of the barbers serves as the manager and receives an extra $530 per month. In addition to the base rate, each barber also receives a commission of $5.50 per haircut.

Other costs are as follows.

Advertising		$210	per month
Rent		$920	per month
Barber supplies		$0.46	per haircut
Utilities		$180	per month plus $0.34 per haircut
Magazines		$30	per month

Carla Vista currently charges $12.30 per haircut.

Determine the variable costs per haircut and the total monthly fixed costs. (Round variable costs to 2 decimal places, e.g. 2.25.)

Total variable cost per haircut		$
Total fixed		$

Compute the break-even point in units and dollars.

Break-even point			haircuts
Break even sales		$

Determine net income, assuming 2,330 haircuts are given in a month.

Net income / (Loss)

$

Answer 1

Solution

Total Variable cost per Haircut		$            6.30
Total Fixed cost		$ 11,040.00

.

Break-even point in units	1,840
Break-even point in dollars	$ 22,632.00

.

Income statement at 2330 haircuts
Sales revenue	$ 28,659.00
Variable costs	$ 14,679.00
Contribution margin	$ 13,980.00
Fixed cost	$ 11,040.00
Net income	$    2,940.00

Working

Variable costs		Amount
Barber supplies		$            0.46
Utilities		$            0.34
Commission		$            5.50
Total Variable cost per Haircut		$            6.30

.

Fixed costs
Advertising		$        210.00
Rent		$        920.00
Utilities		$        180.00
Magazines		$          30.00
Barber salaries	(7*1310)+530	$    9,700.00
Total Fixed cost		$ 11,040.00