Question

Vin Diesel owns the Fredonia Barber Shop. He employs 7 barbers and pays each a base rate of $1,370 per month. One of the barbers serves as the manager and receives an extra $500 per month. In addition to the base rate, each barber also receives a commission of $5.86 per haircut.

Other costs are as follows.

Advertising		$200	per month
Rent		$930	per month
Barber supplies		$0.48	per haircut
Utilities		$175	per month plus $0.31 per haircut
Magazines		$30	per month

Vin currently charges $11.65 per haircut.

Determine net income, assuming 2,490 haircuts are given in a month. (Round answer to 0 decimal places, e.g. 1,225.)

Net income / (Loss)

$

Answer 1

Solution

Net income

$    1,025

Working

Income statement at 2490 haircuts
Sales revenue	$ 29,008.50
Variable costs (2490 x 6.65)	$ 16,558.50
Contribution margin	$ 12,450.00
Fixed cost	$ 11,425.00
Net income	$    1,025.00

.

Variable costs		Amount
Barber supplies		$            0.48
Utilities		$            0.31
Commission		$            5.86
Total Variable cost per Haircut		$            6.65

.

Fixed costs
Advertising		$        200.00
Rent		$        930.00
Utilities		$        175.00
Magazines		$          30.00
Barber salaries	(7*1370)+500	$ 10,090.00
Total Fixed cost		$ 11,425.00