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P22.2A (LO 1, 2, 3, 4) Service Vin Diesel owns the Fredonia Barber Shop. He employs four barbers and pays each a base rate
P22.2A (LO 1, 2, 3, 4) Service 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. Determine variable and fixed costs, compute break-even point, prepare a CVP graph, and determine net income. Other costs are as follows. $200 per month $1,100 per month $0.30 per haircut Advertising Rent Barber supplies Utilities Magazines $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. VC $5 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 1,600 haircuts are given in a month. P22.3A (LO 3, 4, 5) Jorge Company bottles and distributes B-Lite, a diet soft drink. The beverage is sold for 50 cents per 16-ounce bottle to retailers. For the year 2020, management estimates the following revenues and costs. Prepare a CVP income statement, compute break-even point, contribution margin ratio, margin of safety ratio, and sales for target net income. Excel Sales $1,800,000 Direct materials 430,000 Selling expenses-variable Selling expenses-fixed $70,000 65,000 Direct labor 360,000 Manufacturing overhead-variable Manufacturing overhead-fixed 380,000 Administrative expenses-variable Administrative expenses-fixed 20,000 60,000 280,000 Instructions a. Prepare a CVP income statement for 2020 based on management's estimates. (Show column for total amounts only.) b. Compute the break-even point in (1) units and (2) dollars. (1) 2,700,000 units c. Compute the contribution margin ratio and the margin of safety ratio. (Round to nearest full percent.) CM ratio 30% d. Determine the sales dollars required to earn net income of $180,000.
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