Problem 7,8

The College Barber Shop employs four barbers. One barber, who also serves as the manager, is paid a salary of $2,000 per month. The other barbers are paid $1,400 per month. In addition, each barber is paid a commission of $4 per haircut. Other monthly costs are: store rent $800 plus 60 cents per haircut, depreciation on equipment $500, barber supplies 40 cents per haircut, utilities $300, and advertising $200. The price of a haircut is $10. a. Determine the variable cost 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 increments on the vertical axis. d. Determine the net income, assuming 1,800 haircuts are given in a month. Griffey Manufacturing had a bad year in 20 times 8. For the first time in its history it operated at a loss. The company's income statement showed the following results from selling 60,000 units of product: Net sales $1,300,000: total costs and expenses $1,740,000, and net loss $240,000. Costs and expenses consisted of the following. Management is considering the following independent alternatives for 20 times 9. Increase unit selling price 20% with fixed costs increasing by $40.000 and sales volume (units) decreasing by 12% Change the compensation of salespersons from fixed annual salaries totaling $200,000 to total salaries of $40,000 plus a 5% commission on net sales. Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of good sold to 50: 50. a. Compute the break-even point in dollars for 20 times 8. b. Compute the break-even point in dollars under each of the alternative courses of action. Which course of action do you recommend