Ned's Barbershop' Ned's Barbershop specializes in haircuts for hipsters. The only service available at Ned's is a 40- minute haircut (and optional beard trim) for which the customer is charged $30. The shop has five barbers. Ned does not work in the shop and, as owner/entrepreneur, he takes no salary. Each barber is paid an annual salary of $36,000. All equipment including store fixtures and barbering equipment is leased on an annual basis at $10,400 per year. Building space is leased at the rate of $2,500 per month (or $30,000 per year). Each haircut requires approximately $1 worth of supplies, such as shampoo, conditioner, mustache wax, etc. Answer the following. 1. Compute the contribution margin per haircut. 2. Compute the annual break-even point in number of haircuts. 3. Compute the profit or loss at three different volumes of output: a. Last year, Ned's performed 9,000 haircuts. What was the total profit or loss and profit or loss per haircut? Assume costs and the price per haircut were the same last year. b. What would total profit and profit per haircut have been at 10% higher volume, i.e., 9,900 haircuts? c. What would total profit and profit per haircut have been at 10% lower volume? 4. Ned is considering the following changes to how he pays the barbers and the landlord. a. Change only how barbers are paid. Instead of receiving a salary, barbers would receive a commission equal to two-thirds of the selling price of each haircut. What is the new contribution margin per haircut? What is the new annual break-even point in number of haircuts? b. Change only the building lease agreement. Instead of receiving the $2,500 in rent every month, the landlord would receive monthly rent of $250 plus-10% of the revenue per haircut. What is the new contribution margin per haircut? What is the new annual break- even point in number of haircuts? c. Change both the compensation system for the barbers and the building lease agreement. If both are changed, what is the new contribution margin per haircut? What is the new annual break-even point in number of haircuts? 5. Which cost structure would you recommend and why? Explain, at a minimum, what your recommendation assumes about the following: a. Do you think Ned will be able to implement the changes outlined in question 4? Will the barbers agree to work on commission? Will the landlord agree to accept less fixed rent in exchange for a share of revenue? b. Do you expect the number of haircuts sold to differ across the four cost structures? If so, what differences would you expect? c. What are the differences in risk to Ned across the four cost structures