Oriole Diesel owns the Fredonia Barber Shop. He employs 5 barbers and pays each a base...

Oriole Diesel owns the Fredonia Barber Shop. He employs 5 barbers and pays each a base rate of $1,510 per month. One of the barbers serves as the manager and receives an extra $580 per month. In addition to the base rate, each barber also receives a commission of $8.40 per haircut.

Other costs are as follows.

Advertising	$300	per month
Rent	$1,020	per month
Barber supplies	$0.45	per haircut
Utilities	$150	per month plus $0.15 per haircut
Magazines	$30	per month

Oriole currently charges $18 per haircut.

1) Compute the break-even point in units and dollars.
2) Determine net income, assuming 1,700 haircuts are given in a month.

Solutions

Expert Solution

Breakeven units = 1070 units

Net income at 1700 units = $5,670

Working

A	Sale Price per unit	$ 18.00
B	Variable Cost per Unit (0.45+0.15+8.4)	$ 9.00
C=A - B	Unit Contribution	$ 9.00
D	Total Fixed cost ((1510*5)+580+300+1020+150+30)	$ 9,630.00
E=D/C	Breakeven point in units	1,070

Sales (1700*18)	$ 30,600.00
Variable cost (1700*9)	$ 15,300.00
Contribution margin	$ 15,300.00
Total Fixed costs	$ 9,630.00
Net income	$ 5,670.00

ekkarill92 answered 1 year ago

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