Question

Problem 22-1A (Part Level Submission) Vin Diesel owns the Fredonia Barber Shop. He employs 5 barbers and pays each a base rate of $1,300 per month. One of the barbers serves as the manager and receives an extra $540 per month. In addition to the base rate, each barber also receives a commission of $5.63 per haircut. Other costs are as follows. Advertising $290 per month Rent $910 per month Barber supplies $0.39 per haircut Utilities $180 per month plus $0.24 per haircut Magazines $20 per month Vin currently charges $11.26 per haircut. Determine the variable costs per haircut and the total monthly fixed costs. (Round variable costs to 2 decimal places, e.g. 2.25.) Total variable cost per haircut $ Total fixed $

Answer 1

Answer:

Total monthly fixed cost = $8,440

Variable cost per haircut = $6.26

Explanation:

Provided information we have,

Fixed cost is defined as the cost which does not depend on quantum of activity and is fixed in value.

Here, we have

Fixed cost = base cost to barbers + extra to manager + advertising + rent + utilities + haircut magazines

= ($1,300 $\times$ 5 + $540 + $290 + $910 + $180 + $20)

= $6,500 + $1,940 = $8,440

Variable cost is the cost which is dependable on quantum of activity and changes with each unit.

Variable cost = commission per haircut + barber supplies + utilities

= $5.63 + $0.39 + $0.24 = $6.26 per haircut

Total monthly fixed cost = $8,440

Variable cost per haircut = $6.26