Richard Casper owns the Fredonia Barber Shop. He employs five barbers and pays e

Question

Richard Casper owns the Fredonia Barber Shop. He employs 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 $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.

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.





Determine the variable cost per haircut and the total monthly fixed costs. (Enter variable cost per unit to 2 decimal places, e.g. 5.87.)

Variable costs $
Total fixed costs $







Compute the break-even point in units and dollars. (Round per unit costs to 2 decimal places, e.g. 5.87 and the answers to 0 decimal places, e.g. 125.)

Breakeven point in units _______ haircuts
Breakeven point in dollars $







Determine net income, assuming 1,900 haircuts are given in a month.

Explanation / Answer

Variable costs Commission on haircut $5.50 Utilities $0.20 Barber supplies $0.30 Total VC $6.00 Fixed Costs Barbers salaries 5,000 Additional manager salary 500 Rent 900 Advertising 200 Utilities 175 Magazines 25 Total FC 6,800 Charge per HC $10 Variable margin 10-6=4 Breakeven 6,800/4= 1,700 haircuts 1,700*10= $17,000 Net income 1,900 *4- 6,800= $800.

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