Problem 18-02A a-b,d (Part Level Submission) Crane Diesel owns the Fredonia Barber Shop. He employs 6 barbers and pays each a base rate of $1,490 per month. One of the barbers serves as the manager and receives an extra $600 per month. In addition to the base rate, each barber also receives a commission of $10.40 per haircut. Other costs are as follows. Advertising $220 per month Rent $950 per month Barber supplies $0.50 per haircut Utilities $195 per month plus $0.10 per haircut Magazines $30 per month Crane currently charges $20 per haircut.

Instructions

(a)

Determine the variable costs per haircut and the total monthly fixed costs.

(a) VC $5

(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 1,600 haircuts are given in a month.