Problem 18-1A (Part Level Submission) Vin Diesel owns the Fredonia Barber Shop.
ID: 2565763 • Letter: P
Question
Problem 18-1A (Part Level Submission) Vin Diesel owns the Fredonia Barber Shop. He employs 7 barbers and pays each a base rate of $1,430 per month. One of the barbers serves as the manager and receives an extra $520 per month. In addition to the base rate, each barber also receives a commission of $5.64 per haircut. Other costs are as follows. dvertising Rent Barber supplies Utilities Magazines $280 per month $940 per month $0.37 per haircut $170 per month plus $0.23 per haircut $20 per month Vin currently charges $11.24 per haircut.Explanation / Answer
Variable costs = Commission + Barber supplies+ Utilities portion of variable expense
= 5.64 + 0.37 + 0.23 = 6.24 per haircut
Fixed costs = 7 * 1430 + 520 + 280 + 940 + 170 + 20 = 11940
Contribution margin = (11.24 - 6.24) /11.24 * 100 = 44.48%
Break even point in Dollars = Fixed cost / Contribution margin % = 11940 / 44.48% = 26844
Break even point in haircuts = 26844 / 11.24 = 2388 Haircuts
Net income for 2320 haircuts = 2320 * 11.24 * 44.48% - 11940 = -341