P18.2A - Question:

Vin Diesel owns the Fredonia Barber Shop. He employs four barbers and pays each a base rate of $1,250 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 Rent Barber supplies Utilities Magazines

$200 per month $1,100 per month $0.30 per haircut $175 per month plus $0.20 per haircut $25 per month

Vin currently charges $10 per haircut.

Instructions a. Determine the variable costs per haircut and the total monthly fixed costs. b. Compute the break-even point in units and dollars. d. Determine net income, assuming 1,600 haircuts are given in a month.