Vin Diesel owns the Fredonia Barber Shop. He employs 5 barbers and pays each a b

Question

Vin Diesel owns the Fredonia Barber Shop. He employs 5 barbers and pays each a base rate of $1, 250 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 $5.50 per haircut. Other costs are as follows. Vin currently charges SI 1.00 per haircut. Determine the variable costs per haircut and the total monthly fixed costs. Compute the break-even point in units and dollars. Determine net income, assuming 2,300 haircuts are given in a month.

Explanation / Answer

Fredonia barber Shop Details $ per hair cut Fixed $ per month Revenue per hair cut                  11.00 Variable costs per hair cut Barber commission per hair cut                     5.50 Barber supplies per hair cut                     0.30 Utilities per hair cut                     0.20 a Total variable cost per hair cut                     6.00 Contribution per margin per hair cut                     5.00 b Fixed costs Barbars base rate            6,250.00 Additional amt for manager               500.00 Advertising               200.00 Rent               910.00 Utilities                 170.00 Magazines                  20.00 Total Fixed cost $       8,050.00 c Total Fixed cost            8,050.00 Contribution per margin per hair cut                     5.00 Break even no of hair cut=8050/5            1,610.00 nos Break even sales =1610*11= $      17,710.00 d Net income when no of hair cuts =2300 a month Details Amt $ Sales Revenue          25,300.00 Less variable cost @$6          13,800.00 Contribution Margin          11,500.00 Less Monthly Fixed cost            8,050.00 Net Operating Income= $        3,450.00

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