Advertising	$200 per month
Rent	$1,100 per month
Barber supplies	$0.30 per haircut
Utilities	$175 per month plus $0.20 per haircut
Magazines	$25 per month

Telly currently charges $10 per haircut.

Instructions

	1 Determine the variable costs per haircut and the total monthly fixed costs. VC $5
	2 Compute the break-even point in units and dollars.

	3 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.
	4 Determine net income, assuming 1,700 haircuts are given in a month.

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Dousmann Corp.'s sales slumped badly in 2014. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 500,000 units of product: sales $2,500,000; total costs and expenses $2,600,000; and net loss $100,000. Costs and expenses consisted of the amounts shown below.

	Total	Variable	Fixed
Cost of goods sold	$2,140,000	$1,540,000	$600,000
Selling expenses	250,000	92,000	158,000
Administrative expenses	210,000	68,000	142,000
	$2,600,000	$1,700,000	$900,000

Management is considering the following independent alternatives for 2015.

	1 Increase unit selling price 20% with no change in costs, expenses, and sales volume.
	2 Change the compensation of salespersons from fixed annual salaries totaling $150,000 to total salaries of $60,000 plus a 5% commission on sales.

Instructions

	1 Compute the break-even point in dollars for 2014. Alternative 1 $2,093,023
	2 Compute the break-even point in dollars under each of the alternative courses of action. (Round all ratios to nearest full percent.) Which course of action do you recommend