Stan Loy owns the Vista Barber Shop. He employs 5 barbers and pays each a base r

Question

Stan Loy owns the Vista Barber Shop. He employs 5 barbers and pays each a base rate of $1,070 per month. One of the barbers serves as the manager and receives an extra $502 per month. In addition to the base rate, each barber also receives a commission of $5.60 per haircut.

Other costs are as follows.

Advertising $178 per month
Rent $921 per month
Barber supplies $0.30 per haircut
Utilities $175 per month plus $0.40 per haircut
Magazines $21 per month

Matt currently charges $10.50 per haircut.

a. Compute the break-even point in units and dollars.

b. Determine net income, assuming 2,000 haircuts are given in a month.

Explanation / Answer

Current break-even point 385,920 + 34.80x = 54x x = 20,100 pairs of shoes and $1,085,400 in sales The company is considering paying the store manager of Shop 48 an incentive commission of 75 cents per pair of shoes (in addition to the salesperson's commission). If this change is made, what will be the new break-even point in dollar sales and in unit sales? 385,920 + 35.55x = 54x x = 20,917 pairs of shoes and $1,129,518 in sales As an alternative the company is considering paying the store manager 75 cents commission on each pair of shoes sold in excess of the break-even point. If this change is made, what will be the shop's net operating income or loss if 23,620 The new break-even point or the old one? Old break-even point (23,620 x 54) - 385,920 - (34.80 x 23,620) - (3,520 x 0.75) = $64,944 Net operating income New break-even point (23,620 x 54) - 385,920 - (35.55 x 23,620) - (2,703 x 0.75) = $47,842 Net operating income

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