Stephen Thorne owns the Fredonia Barber Shop. He employs five barbers and pays each a base rate
Question:
Stephen Thorne owns the Fredonia Barber Shop. He employs five barbers and pays each a base rate of $1,000 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 $5.50 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
Stephen currently charges $10 per haircut.
Instructions
(a) Determine the variable cost per haircut and the total monthly fixed costs.
(b) Compute the break-even point in units and dollars.
(c) Prepare a CVP graph, assuming a maximum of 1,800 haircuts in a month. Use increments of 300 haircuts on the horizontal axis and $3,000 on the vertical axis.
(d) Determine net income, assuming 1,900 haircuts are given in a month.
Step by Step Answer:
Accounting Tools for business decision making
ISBN: 978-0470095461
4th Edition
Authors: kimmel, weygandt, kieso