Question

Vin diesel owns the fredonia barber shop. he employs 7 barbers and pays each a base rate of $1,380 per month. one of the barbers serves as the manager and receives an extra $530 per month. in addition to the base rate, each barber also receives a commission of $5.92 per haircut. other costs are as follows. advertising $270 per month rent $940 per month barber supplies $0.30 per haircut utilities $180 per month plus $0.25 per haircut magazines $25 per month vin currently charges $11.47 per haircut. determine the variable costs per haircut and the total monthly fixed costs. (round variable costs to 2 decimal places,
e.g. 12.25.) total variable cost per haircut $ total fixed $ compute the break-even point in units and dollars. (round answers to 0 decimal places,
e.g. 1,250.) break-even point haircuts break-even point $ determine net income, assuming 2,380 haircuts are given in a month.

Answer 1

Given:                         Variable Cost     Fixed Cost 
                                     per haircut          per month
base salary                                               9660
manager bonus                                          530
commission                     5.92
advertising                                                 270
rent                                                            940
barber supplies                0.30
utilities                             0.25                   180
magazines                                                  25              
Total                                6.47                11605

Revenue                         11.47

Break even point in unit = Fixed expenses per month / Contribution margin per month.

Break even point in unit = 11,605 / (11.47-6.47) = 11,605 / 5 = 2,321 haircuts

Break even point in $ = Fixed expenses / Contribution margin ratio

Break even point in $ = 11,605 / (5/11.47) = 11,605 / 0.44 = 26,375

Net Income = (Contribution Margin * # of haircuts) - Fixed expenses

Net Income = (5 * 2,380) - 11,605 = 11,900 - 11,605 = 295