Question
The Fantastic Barber Shop employs four barbers. One barber, who also serves as the manager, is paid a salary of $5,000 per month. The other
The Fantastic Barber Shop employs four barbers. One barber, who also serves as the manager, is paid a salary of $5,000 per month. The other 3 barbers are paid $2,200 each per month. In addition, a fixed commission of $3 is paid to the barbers per haircut. Other costs are as follows: Store basic monthly rent $800 Monthly insurance $300 Barber supplies $1.25 per haircut Monthly utilities $500 The price of a haircut is $33 Required: (a) Calculate the break-even point in both units and dollars (b) Determine the operating income (using the CVP concept), assuming 1,000 haircuts are given in a month. ( c) Base on the sales level in (b) above, compute the degree of operating leverage for the company. ( d) Compute the margin of safety for ( b) above. ( e) Draw a CVP graph (in good format) to illustrate your findings above. Include ALL other information that you think useful to a manager in the graph.
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