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Vin Diesel owns the Fredonia Barber Shop.

He employs four barbers and pays each a base rate 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 rate, each barber also receives a commission of $4.50 per haircut.

Other costs are as follows:

Advertising $200 per month
Rent $1,100 per month
Barber supplies $0.30 per haircut
Utilities $175 per month plus $0.20 per haircut
Magazines $25 per month
Vin currently charges $10 per haircut.

Required:

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

(b) Compute the break-even point in units and dollars.

(c) Determine net income?

Respuesta :

Answer:

(a) $5; $7,000

(b) 1,400 haircuts ; $ 14,000

(c) $1,000.

Explanation:

Barber's base rate (4 × 1,250) = $5,000

Total Fixed cost (TFC):

= Barber's base rate + Manager's salary + Advertising + Rent + Utilities + Magazines

= $5,000 + $500 + $200 + $1,100 + $175 + $25

= $7,000

(a) Variable cost per hair cut = 4.50 + 0.20 + 0.30

                                               = $5

Contribution margin per unit = 10 - 5  

                                                = $5

(b) Break-even point in units:

= Total fixed cost ÷ contribution margin per unit

= 7,000 ÷ 5

= 1,400 haircuts

Break-even point in dollars = 1,400 × 10

                                             = $ 14,000

(c) Assuming 1,600 haircuts per month,

Net income = (No. of haircuts × Contribution margin per unit) - TFC

                   = (1,600 × 5 ) - 7,000

                   = $1,000.

marvineetesh3

The variable cost is $5 per month and total monthly fixed cost is $7,000 with the breakeven point in units and dollars is 1400 units and $14000 with the net income of $1,000.

What is the variable cost?

Variable costs are those costs that alter as the quantity of the good or service that a business makes changes.

Variable costs are the aggregate of marginal costs over all units produced.

They can also be seen in normal costs.

Computation of variable cost and total monthly fixed cost:

First, find the value of barber's base rate:

[tex]=\text{Number of barbers} \times \text{Per Month Bace Rate}\\\\=4 \times \$1,250\\\\ = \$5,000[/tex]

Then the total fixed cost (TFC) is:

[tex]= \text{Barber's Base Rate + Manager's Salary + Advertising + Rent + Utilities + Magazines}\\\\= \$5,000 + \$500 + \$200 +\$1,100 + \$175 + \$25\\\\=\$7,000[/tex]

(a). Variable cost per hair cut:

[tex]=\$4.50 + \$0.20 + \$40.30\\=\$5[/tex]

Then, Contribution margin per unit:

[tex]=\$10-\$5\\=\$5[/tex]

(b). Break-even point in units:

[tex]=\dfrac{\text{Total Fixed Cost}}{\text{Contribution Margin Per Unit}}\\\\=\dfrac{7,000}{5}\\\\= 1,400 \text{Haircuts}[/tex]

Then the breakeven point in dollars is:

[tex]=1,400\times 10\\\\=14,000[/tex]

(c). Computation of net income:

Let 1,600 haircuts per month,

[tex]\text{Net Income} = \text{No. of Haircuts} \times {\text{Contribution Margin Per Unit}} - \text{TFC}\\\\\text{Net Income} = 1,600 \times 5-7,000\\\\\text{Net Income} = \$1,000.[/tex]

learn more about the variable cost, refer to:

https://brainly.com/question/1494274

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