PROBLEMS: SET B

P$5-1$B The Sasoon Barber Shop employs four barbers. One barber, who also serves as the manager, is paid a salary of $$3,000$ per month. The other barbers are paid $$1,500$ per month. In addition, each barber is paid a commission of $$3$ per haircut. Other monthly costs are store rent $$700$ plus $60$ cents per haircut, depreciation on equipment $$400,$ barber supplies $40$ cents per haircut, utilities $$300,$ and advertising $$100.$ The price of a haircut is $$10.$

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$ increments on the vertical axis.

$($d$)$ Determine the net operating income, assuming $1,800$ haircuts are given in a month.

P$5-2$B All Frute Company bottles and distributes Frute Ade, a fruit drink. The beverage is sold for $50$ cents per $16-$ounce bottle to retailers, who charge customers $70$ cents per bottle. For the year $2020,$ management estimates the following revenues and costs.

$\backslash$table$[[$Sales$,$$$2,500,000,$Selling expenses$-$variable$],[$Direct materials,$360,000,$Selling expenses$-$fixed$],[$Direct labor,$450,000,$Administrative expenses$-],[\backslash$table$[[$Manufacturing overhead$-],[$variable$]],270,000,\backslash$table$[[$variable$],[$Administrative expenses$-]]],[\backslash$table$[[$Manufacturing overhead$-],[$fixed$]],380,000,$fixed$]]$

Instructions

$($a$)$ Prepare a CVP income statement for $2020$ based on management's estimates. $($Show a column for total amounts only.$)$

$($b$)$ Compute the break$-$even point in $(1)$ units and $(2)$ dollars.

$($c$)$ Compute the contribution margin ratio and the margin of safety ratio.$($d$)$

Determine the sales dollars required to earn net operating income of $$624,000.$