Question

Ivanhoe Diesel owns the Fredonia Barber Shop. He employs 5 barbers and pays each a base rate of $1,380 per month. One of the barbers serves as the manager and receives an extra $535 per month. In addition to the base rate, each barber also receives a commission of $3.75 per haircut.

Other costs are as follows.

Advertising		$270	per month
Rent		$1,010	per month
Barber supplies		$0.50	per haircut
Utilities		$160	per month plus $0.15 per haircut
Magazines		$35	per month

Ivanhoe currently charges $11 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		$enter a dollar amount rounded to 2 decimal places
Total fixed		$enter a dollar amount

eTextbook and Media

  

  

Compute the break-even point in units and dollars.

Break-even point		enter the Break-even point in units	haircuts
Break even sales		$enter the Break-even sales in dollars

eTextbook and Media

  

  

Determine net income, assuming 1,670 haircuts are given in a month.

Net income / (Loss)

$enter net income in dollars

Answer 1

Total Variable cost (3.75+0.50+0.15)	4.40
Fixed cost (5*1380 + 270+535+1010+160+35)	8910

.

Breakeven point = Fixed cost/Contribution margin per haircut

Breakeven point = 8910/(11-4.40)	1350
Breakeven sales (1350*11)	14,850

.

Net income = (1670*6.60) - 8910 = 2112