*ALL PART OF ONE QUESTION*

Exercise 2:

The Ottawa Barber Shop employs four barbers. One barber, who also serves as the manager, is paid a salary of $3,900 per month. The other barbers are paid $1,900 per month. In addition, each barber is paid a commission of $2 per haircut. Other monthly costs are: store rent $700 plus 60 cents per haircut, depreciation on equipment $500, barber supplies 40 cents per haircut, utilities $300, and advertising $100. The price of a haircut is $10.

Instructions

(a) Determine the variable cost per haircut, the total monthly fixed costs, contribution margin per haircut, and contribution margin ratio.

(b) Compute the break-even point in units and dollars.