The Ottawa Barber Shop employs four barbers. One barber, who also serves as the manager, is paid a salary of $3,000 per month. The other barbers are paid $1,500 per month. In addition, each barber is paid a commission of $3 per haircut. Other monthly costs are: store rent $700 plus 60 cents per haircut, depreciation on equipment $400, barber supplies 40 cents per haircut, utilities $300, and advertising $100. The price of a haircut is $10.

1. Determine the variable cost per haircut and the total monthly fixed costs.

2. Compute the break-even point in units and dollars.

3. Determine net income, assuming 1,800 haircuts are given in a month. (Prepare a CVP Income Statement).

Ottawa Barber Shop CVP Income Statement