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BArbers Commision is $5.30 Other costs are as follows. Advertising $204 per mont

ID: 2435605 • Letter: B

Question

BArbers Commision is $5.30

Other costs are as follows.

Advertising $204 per month
Rent $904 per month
Barber supplies $0.30 per haircut
Utilities $170 per month plus $0.20 per haircut
Magazines $25 per month


Matt currently charges $9.67 per haircut.

A)Determine the variable cost per haircut and the total monthly fixed costs. (Round variable costs to 2 decimal places, e.g. 10.50. Round fixed costs to 0 decimal places, e.g. 125.)

B)Compute the break-even point in units and dollars. (Round answers to 0 decimal places, e.g. 125.)

C)Determine net income, assuming 2,400 haircuts are given in a month.

Explanation / Answer

A)Determine the variable cost per haircut and the total monthly fixed costs. (Round variable costs to 2 decimal places, e.g. 10.50. Round fixed costs to 0 decimal places, e.g. 125.)

Variable cost per hair cut
=====================
Barber's Commission               $5.30
Barber supplies                       $0.30
Utilities                                 $0.20
Total Variable cost              $5.80
                                         =======
Total Monthly Fixed Costs
======================
Barber's remuneraion ($1,100 x 5) + $476                $5,976
Advertisement                                                          $204
Rent                                                                        $904
Utilities                                                                   $175
Magazine                                                                  $25
Total Monthly Fixed costs                                  $7,284
                                                                         =======
B)Compute the break-even point in units and dollars. (Round answers to 0 decimal places, e.g. 125.)

Contribution Margin per hair cut = $9.67 - $5.80 = $3.87

Break-even point (units i.e. no. of hair cuts) = Total Monthly FC / CM per hair cut
       = $7,284 / $3.87 = 1,882.12 or 1,883 hair cuts

Break-even point (dollars) = Total Monthly FC X SP per hair cut / CM per hair cut
      = $7,284 X $9.67 / $3.87 = $18,200.59 or $18,201

C)Determine net income, assuming 2,400 haircuts are given in a month.
Total contribution 2,400 haircuts X $3.87                   $9,288
Less : Total monthly Fixed costs                                 $7,284  
Net income                                                              $2,004
                                                                              ========