Matt Reiss owns the Fredonia Barber Shop. He employs five barbers and pays each

Question

Matt Reiss owns the Fredonia Barber Shop. He employs five barbers and pays each a base rate of $1,000 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 $5.50 per haircut. Other costs are as follows. Advertising $200 per month Rent $900 per month Barber supplies $0.30 per haircut Utilities $175 per month plus $0.20 per haircut Magazines $25 per month Matt currently charges $10 per haircut.

Explanation / Answer

1. Determine the variable cost per haircut and the total monthly fixed costs? Commision $5.50 Supplies $0.30 Utilities $0.20 Variable costs = $6.00 Wages (5 * $1,000) + $500 = $5,500 Advertising $200 Rent $900 Utilities $175 Magazines $25 Fixed Costs = $6,800 2.Compute the break-even point in units and dollars...

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