P18-1A

Telly Savalas owns the Bonita Barber Shop. He employs four 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 $4.50 per haircut. Other costs are as follows:

Advertising 200 per month - Rent 1,100 per month - Barber supplies .30 per haircut - Utilities 175 per month plus .20 per haircut - Magazines 25 per month.

Telly currently charges $10 per haircut.

(a) Determine the variable costs 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 1,700 haircuts are given in a month.

Thank you :)