Question
John Martin, now retired, owns the Corner Barber Shop. He employs five (5) barbers and pays each a base rate of $500 per month. One
John Martin, now retired, owns the Corner Barber Shop. He employs five (5) barbers and pays each a base rate of $500 per month. One of the barbers serves as the manager and receives an extra $300 per month. In addition to the base rate, each barber also receives a commission of $3 per haircut. A barber can do as many as 20 haircuts a day. The Corner Barber Shop is a corporation with a 30% tax rate and is open 24 days a month. Other costs are incurred as follows:
Advertising $ 200 per month
Rent $ 400 per month
Barber Supplies $ 0.90 per haircut
Utilities $ 175 per month plus $0.35 per haircut
Magazines $ 25 per month
Cleaning Supplies $ 0.15 per haircut
John currently charges $8 per haircut.
Required:(a) John wants to earn $2,160 in after-tax operating profits. Compute the number of haircuts that must be given to reach this goal in June. (b) In June, only 1,500 haircuts were given. Compute the price per haircut that John should have charged in June to earn $2,160 in after-tax operating profits.
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