Determine variable and fixed costs and break-even point
Matt Reiss have the Fredonia Barber Shop. He employs 5-barbers and pays each a base rate of $1,000 every month. One of the barbers serves as manager and receives an extra $500 every month. In addition to the base rate, each barber also receives a commission of $5.50 per haircut.
Other costs are as follows.
Advertising $200 per month
Rent $900 per month
Barber supplies $0.30 per haircut
Utilities $175 per month plus $0.20 per haircut
Magazines $25 per month
Matt currently charges $10 per haircut.
Hint:
Determine variable and fixed costs, compute break-even point, prepare a CVP graph, and determine net income.
Instructions
(a) Determine the variable cost per haircut and the total monthly fixed costs.
(b) Compute the break-even point in units and dollars.
(d) Determine net income, assuming 1,900 haircuts are given in a month.
