Problem 221A Vin Diesel owns the Fredonia Barber Shop He emp

Problem 22-1A Vin Diesel owns the Fredonia Barber Shop. He employs 6 barbers and pays each a base rate of $1,600 per month. One of the barbers serves as the manager and receives an extra $520 per month. In addition to the base rate, each barber also receives a commission of $5.99 per haircut Other costs are as follows. Advertising Rent Barber supplies Utilities Magazines $210 per month $970 per month $0.38 per haircut $180 per month plus $0.31 per haircut $30 per month Vin currently charges $11.68 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 Compute the break-even point in units and dollars. (Round answers to 0 decimal places, e.g. 1.250.) Break-even point Break-even point s haircuts

Solution

Variable Cost:

Commission per hair cut = 5.99

Barbaer supplies = 0.38

Utilities = 0.31

Total variable cost per haircut = 5.99+0.38+0.31 = 6.68

Fixed Cost:

Salary to Barbers = 1600*6 + 520 = 10120

Advertising = 210

Rent = 970

Utilities = 180

Magazines = 30

Total fixed cost = 10120+210+970+180+30 = 11510

Contribution per unit = Sales - Variable cost = 11.68 - 6.68 = 5

Break even point = Total fixed cost/Contribution per unit = 11510/5 = 2302 hair cuts

Break even point in $ = 2302*11.68 = 26888

Net income = 2380*(11.68 - 6.68) - 11510 = 390