Matt Reiss owns the Fredonia Barber Shop. He employs 5 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 $10.00 per haircut.
(a) Determine the variable cost per haircut and the total monthly fixed costs.
(b)Compute the break-even point in units and dollars.
(c)Determine net income, assuming 1,900 haircuts are given in a month.