Question

Problem 19-1A Vin Diesel owns the Fredonia Barber Shop. He employs 5 barbers and pays each a base rate of $1,500 per month. One of the barbers serves as the manager and receives an extra $540 per month. In addition to the base rate, each barber also receives a commission of $5.77 per haircut. Other costs are as follows. Advertising $230 per month $980 per month Rent Barber supplies $0.36 per haircut Utilities $170 per month plus $0.30 per haircut Magazines $30 per month Vin currently charges $11.43 per haircut. Determine the variable costs per haircut and the total monthly fixed costs. (Round variable costs to 2 decimal places, e.g. 12.25.) Total variable cost per haircut $1 Total fixed %24 LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT VIDEO: SIMILAR PROBLEM Compute the break-even point in units and dollars. (Round answers to 0 decimal places, e.g. 1,250.) Break-even point |haircuts Break-even point LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT VIDEO: SIMILAR PROBLEM Determine net income, assuming 2,500 haircuts are given in a month. Net income / (Loss)

Answer 1

TOTAL MONTHLY FIXED COST

Salaries(1500×5)	$7500
Extra manager salary	$540
Advertising	$230
Rent	$980
Utilities	$170
Magazine	$30
TOTAL MONTHLY FIXED COST	$9450

TOTAL VARIABLE COST PER HAIRCUT

Commission	$5.77
Supplies	$0.36
Utilities	$0.30
TOTAL VARIABLE COST PER HAIRCUT	$6.43

Break even point in unit and dollars

     

Selling price per hair	$11.43
Variable cost	($6.43)
Contribution margin	$5.00

BREAK EVEN POINT (IN UNITS)= TOTAL MONTHLY FIXED COST/CONTRIBUTION MARGIN PER UNIT

   = $9450/$5.00= 1890 units

BREAK EVEN POINT(in dollars) =BREAK EVEN UNITS×SELLING PRICE PER HAIRCUT

   = 1890units ×11.43 = $21603(rounded)

COMPUTE NET INCOME Assuming 2500 haircuts in a month

selling price (11.43)×haircuts(2500)=$28575

Less VARIABLE COST

(2500×6.43). =(16075)

Less Fixed costs. = (9450)

NET INCOME. = 3050

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