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FromTheMoon [43]
3 years ago
6

Carla Vista Diesel owns the Fredonia Barber Shop. He employs 5 barbers and pays each a base rate of $1,480 per month. One of the

barbers serves as the manager and receives an extra $510 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 $220 per month
Rent $980 per month
Barber supplies $0.36 per haircut
Utilities $180 per month plus $0.24 per haircut
Magazines $20 per month

Carla Vista currently charges $11.00 per haircut.

a.) 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 $ ______


b.) Compute the break-even point in units and dollars.

Break-even point _______ haircuts

Break-even sales $ _______


c.) Determine net income, assuming 2,420 haircuts are given in a month.

Net income / (Loss) $ _______
Business
1 answer:
Umnica [9.8K]3 years ago
8 0

Answer:

a). Total fixed costs per month=$9,310

Total variable cost per haircut=$28.10

b). Break-even point=1,900 haircuts

Break-even sales=11×1,900=$20,900

c). Net income=$2,548 profit

Explanation:

a)

Variable costs depend on the level of output. They can be calculated as follows;

Total variable cost per haircut=Commission per haircut+supplies per hair cut+utilities per hair cut

where;

Commission per haircut=$5.50=$5.50

Barber supplies per hair cut=$0.36

utilities per hair cut=$0.24

replacing;

Total variable cost per haircut=5.50+0.36+0.24=$6.10

Fixed costs do not depend on the level of output. They can be calculated as follows;

Total fixed costs per month=base rate per month+manager extra salary per month+advertising per month+rent per month+utilities per month+magazines per month

where;

base rate per month=1,480×5=$7,400

manager extra salary per month=510×1=$510

advertising per month=$220

rent per month=$980

utilities per month=$180

magazines per month=$20

replacing;

Total fixed costs per month=7,400+510+220+980+180+20=$9,310

Total fixed costs per month=$9,310

Total variable cost per haircut=$6.10

b). Break-even point is the point where the cost of goods sold is the same as the amount received in sales;

Cost of goods sold=Fixed costs+total variable costs

where;

Fixed costs=$9,310 per month

Total variable costs=variable cost per haircut×number of haircuts=6.10×n=$6.1 n

replacing;

Cost of goods sold=6.1 n+9,310... equation 1

Total sales=cost per haircut×number of haircuts (n)=11×n=11 n

Total sales=11 n... equation 2

Equate equation 1 and 2

6.1 n+9,310=11 n

11 n-6.1 n=9,310

4.9 n=9,310

n=9,310/4.9=1,900

n=1,900

Break-even point=1,900 haircuts

Break-even sales=11×1,900=$20,900

c). Determine net income

Net income=Revenue-expenses

where;

revenue=11×2,420=$26,620

expenses=(6.1×2,420)+9,310=14,762+9,310=$24,072

replacing;

Net income=26,620-24,072=$2,548

Net income=$2,548

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