Question

Vin Diesel owns the Blue Spruce Barber Shop. He employs 5 barbers and pays each a base rate of $1,490 per month. One of the barbers serves as the manager and receives an extra $550 per month. In addition to the base rate, each barber also receives a commission of $4.50 per haircut. Other costs are as follows. Advertising $270 per month Rent $990 per month Barber supplies $0.30 per haircut Utilities $185 per month plus $0.20 per haircut Magazines $20 per month Vin currently charges $10.00 per haircut.

(a) Your answer is correct. 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 $ Click if you would like to Show Work for this question: Open Show Work SHOW SOLUTION LINK TO TEXT LINK TO TEXT LINK TO TEXT Attempts: 1 of 3 used

(b) Compute the break-even point in units and dollars. (Round answers to 0 decimal places, e.g. 1,225.) Break-even point in units haircuts Break-even point in dollars $ Click if you would like to Show Work for this question:

Answer 1

Variable cost = 4.50+0.30+0.20 = 5

Fixed cost = (5*1490)+550+270+990+185+20

= 8915

B)

Breakeven units = Fixed cost/Contribution margin per unit

= 8915/(10-5)

= 1783

Breakeven Dollars = 1783*10

= 17,830