Diesel owns the Fredonia Barber Shop. He employs four barbers and pays each a base salary of $1,250 per month. One of the barbers serves as the manager and receives an extra $500 per month. In addition to the base salary, each barber also receives a commission of $4.50 per haircut.

Other costs are as follows.

Vin currently charges $10 per haircut.

Instructions

a. Determine the unit variable costs per haircut and the total monthly fixed costs.
b. Compute the break-even point in sales units and in sales 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 on the vertical axis.
d. Determine net income, assuming 1,600 haircuts are given in a month.

Transcribed Image Text:

$200 per month $1,100 per month $0.30 per haircut $175 per month plus $0.20 per haircut $25 per month Advertising Rent Barber supplies Utilities Magazines