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Vin Diesel owns the Fredonia Barber Shop. He employs 7 barbers and pays each a base...

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.

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.

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.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

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 the variable costs per haircut and the total monthly fixed costs.

(a)

(b)  

Compute the break-even point in units and dollars.

(d)  

Determine net income, assuming 1,600 haircuts are given in a month.

Solutions

Expert Solution

  • Requirement [a]

Variable Cost per haircut

Fixed Cost per month

Base rate wages [$ 1370 x 7 barbers]

$                                                         9,590.00

Manager's salary

$                                                             500.00

Commission

$                                                     5.86

Advertising

$                                                             200.00

Rent

$                                                             930.00

Barber Supplies

$                                                     0.48

Utilities

$                                                     0.31

$                                                             175.00

Magazines

$                                                               30.00

Total

$                                                     6.65

$                                                       11,425.00

Variable cost = $ 6.65 per haircut
Fixed Cost = $ 11,425 per month

  • Requirement [b]

A

Revenue per haircut

$11.65

B

Total variable cost per haircut

$6.65

C = A - B

Contribution margin per haircut

$5.00

D

Total Fixed

$11,425

E = D/C

Break even point

2285

Haircuts Answer

F = E x A

Break even point $

$26,620

Answer

  • Requirement [d]

A

No. of haircuts

1600

B = A x $ 5

Contribution margin

$8,000

C

Total Fixed

$11,425

D = B - C

Net Income (Loss)

($3,425)

Net Loss = $ (3425)

ekkarill92 answered 1 year ago
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