Problem 18-1A

Telly Savalas owns the Bonita Barber Shop. He employs 6 barbers and pays each a base rate of $1,200 per month. One of the barbers serves as the manager and receives an extra $540 per month. In addition to the base rate, each barber also receives a commission of $5.60 per haircut. Other costs are as follows.

Advertising		$230	per month
Rent		$920	per month
Barber supplies		$0.50	per haircut
Utilities		$170	per month plus $0.20 per haircut
Magazines		$20	per month

Telly currently charges $11.50 per haircut.

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Determine the variable cost per haircut and the total monthly fixed costs. (Round variable costs to 2 decimal places, e.g. 2.25.)

Total variable cost per haircut		$ 6.30
Total fixed		$ 5480

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Compute the break-even point in units and dollars. (Do not round any intermediate calculations and round only answers to 0 decimal places, e.g. 1,225.)

Break-even point		1054	haircuts
Break-even point		$ 12121

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Determine net income, assuming 2,440 haircuts are given in a month.

Net income

$ 6848