BArbers Commision is $5.30 Other costs are as follows. Advertising $204 per mont
ID: 2435605 • Letter: B
Question
BArbers Commision is $5.30
Other costs are as follows.
Advertising $204 per month
Rent $904 per month
Barber supplies $0.30 per haircut
Utilities $170 per month plus $0.20 per haircut
Magazines $25 per month
Matt currently charges $9.67 per haircut.
A)Determine the variable cost per haircut and the total monthly fixed costs. (Round variable costs to 2 decimal places, e.g. 10.50. Round fixed costs to 0 decimal places, e.g. 125.)
B)Compute the break-even point in units and dollars. (Round answers to 0 decimal places, e.g. 125.)
C)Determine net income, assuming 2,400 haircuts are given in a month.
Explanation / Answer
A)Determine the variable cost per haircut and the total monthly fixed costs. (Round variable costs to 2 decimal places, e.g. 10.50. Round fixed costs to 0 decimal places, e.g. 125.)
Variable cost per hair cut
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Barber's Commission $5.30
Barber supplies $0.30
Utilities $0.20
Total Variable cost $5.80
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Total Monthly Fixed Costs
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Barber's remuneraion ($1,100 x 5) + $476 $5,976
Advertisement $204
Rent $904
Utilities $175
Magazine $25
Total Monthly Fixed costs $7,284
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B)Compute the break-even point in units and dollars. (Round answers to 0 decimal places, e.g. 125.)
Contribution Margin per hair cut = $9.67 - $5.80 = $3.87
Break-even point (units i.e. no. of hair cuts) = Total Monthly FC / CM per hair cut
= $7,284 / $3.87 = 1,882.12 or 1,883 hair cuts
Break-even point (dollars) = Total Monthly FC X SP per hair cut / CM per hair cut
= $7,284 X $9.67 / $3.87 = $18,200.59 or $18,201
C)Determine net income, assuming 2,400 haircuts are given in a month.
Total contribution 2,400 haircuts X $3.87 $9,288
Less : Total monthly Fixed costs $7,284
Net income $2,004
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