# Telly Savalas owns the Bonita Barber Shop. He employs four barbers and pays each a base rate of \$1,000 per

## Question:

Telly Savalas owns the Bonita Barber Shop. He employs four 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 \$4.50 per haircut.

Other costs are as follows.

Rent ……………………….………….     \$1,100 per month

Barber supplies ……………………….      \$0.30 per haircut

Utilities ……………………………….     \$175 per month plus \$0.20 per haircut

Magazines …………………………….     \$25 per month

Telly currently charges \$10 per haircut.

Instructions

(a) Determine the variable costs per haircut and the total monthly fixed costs.

(b) Compute the break-even point in units and 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 1,700 haircuts are given in a month.

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Related Book For

## Accounting Principles

ISBN: 9781118566671

11th Edition

Authors: Jerry Weygandt, Paul Kimmel, Donald Kieso

Question Details
Chapter # 5
Section: Problem Set A
Problem: 1
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