LINK TO TEXT LINK TO TEXT Open Show Wor Vin Diesel owns the

LINK TO TEXT

LINK TO TEXT

Open Show Wor

Vin Diesel owns the Fredonia Barber Shop. He employs 7.00 barbers and pays each a base rate of $1,650 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 $5.70 per haircut. Other costs are as follows. Advertising $260 per month Rent $800 per month Barber supplies $0.32 per haircut Utilities $185 per month plus $0.20 per haircut Magazines $20 per month Vin currently charges $11.22 per haircut.

Solution

Req a: Variable cost per haircut: Barber supplies 0.32 Utilities expense 0.2 Commission per cut 5.7 Variable cost per haircut: 6.22 per haircut Total monthly fixed cst: Barber salary (7*1650+500*1) 12050 Advertising 260 Rent 800 Utilities 185 Magazines 20 Total monthly fixed cst: 13315 Req b: Service charge: 11.22 Lless: Variable cost 6.22 Contribution margin per cut 5 Total fixed cost 13315 CM ratio: (5/11.22)*100 44.56% Break even units: Total fixed cost / CM per cut 13315/5.00 = 2663 cuts Break even in $: Total fixed cost/ CM ratio 13315 / 44.56% = $ 29879 Req c: Service revenue (3020*11.22) 33884.4 Less: variable cost (3020*6.22) 18784.4 Contribution margin 15100 Less: Fixed cost 13315 Net income 1785