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 addit

(a) The variable costs per haircut include the commission paid to each barber ($4.50) and the cost of barber supplies ($0.30), for a total of $4.80. The total monthly fixed costs include advertising ($200), rent ($1,100), utilities ($175 plus $0.20 per haircut, which equals $325), and magazines ($25), for a total of $1,650. (b) To compute the break-even point in units, we need to find the contribution margin per unit, which is the selling price ($10) minus the variable costs per unit ($4.80), which equals $5.20. To find the break-even point in units, we divide the total monthly fixed costs ($1,650) by the contribution margin per unit ($5.20), which equals \approx imately 317 units. To compute the break-even point in dollars, we multiply the break-even point in units (317) by the selling price ($10), which equals $3,170. (c) To determine net income, we first need to find the total revenue from 1,600 haircuts, which is 1,600 multiplied by the selling price ($10), which equals $16,000. The variable costs for 1,600 haircuts is 1,600 multiplied by the variable cost per unit ($4.80), which equals $7,680. The total fixed costs remain the same at $1,650. Therefore, the total costs for 1,600 haircuts is $9,330 ($7,680 in variable costs plus $1,650 in fixed costs). To find net income, we subtract the total costs ($9,330) from the total revenue ($16,000), which equals $6,670. Therefore, the estimated net income for the month is $6,670.