Other costs are as follows. Matt currently charges $10 per haircut. $ Matt Reiss

Question

     Other costs are as follows.

Matt currently charges $10 per haircut.

$

Matt Reiss owns the Fredonia Barber Shop. Heemploys five barbers and pays each a base rate of $1,000 per month.One of the barbers serves as the manager and receives an extra $500per month. In addition to the base rate, each barber also receivesa commission of $5.50 per haircut.

     Other costs are as follows.

Advertising $200 per month Rent $900 per month Barber supplies $0.30 per haircut Utilities $175 per month plus $0.20 per haircut Magazines $25 per month

Matt currently charges $10 per haircut.

Explanation / Answer

See from table below Variable cost per haircut = $4.00 Total Fixed cost per month = $6,800
Breakeven point (BEP) = Total Fixed Cost/Contribution perhaircut ie BEP = 6800/4 = 1700 Haircuts BEP in $ = BEP Units * Contribution per haircut =1700*$4=$6800
From Below table, we can see that for 1900 haircuts, there isa Profit of $800 which is Net Income.
Items Rate Nos. Total Income: Haircut Charge perHaircut $      10.00 1900 $    19,000.00 Variable cost per Haircut $        6.00 Contribution per haircut $        4.00 Total Contribution 1900 $       4.00 $      7,600.00 Utility perhaircut $        0.20 Barber supplies perhaircut $        0.30 Barber commission perhaircut $        5.50 Fixed Cost per month $      6,800.00 Barber Salary permonth $1,000.00 5 $5,000.00 Manager Salary permonth $    500.00 1 $   500.00 Advertising per month $    200.00 $   200.00 Rent permonth $    900.00 $   900.00 Utilities permonth $    175.00 $   175.00 Magzines permonth $      25.00 $     25.00 Profit per month $        800.00 Items Rate Nos. Total Income: Haircut Charge perHaircut $      10.00 1900 $    19,000.00 Variable cost per Haircut $        6.00 Contribution per haircut $        4.00 Total Contribution 1900 $       4.00 $      7,600.00 Utility perhaircut $        0.20 Barber supplies perhaircut $        0.30 Barber commission perhaircut $        5.50 Fixed Cost per month $      6,800.00 Barber Salary permonth $1,000.00 5 $5,000.00 Manager Salary permonth $    500.00 1 $   500.00 Advertising per month $    200.00 $   200.00 Rent permonth $    900.00 $   900.00 Utilities permonth $    175.00 $   175.00 Magzines permonth $      25.00 $     25.00 Profit per month $        800.00

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