If not profits could be improved by 340000 by

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 0 per haircut ($400 ÷ 2,000 haircuts). Alternatively, we could use the following formula: [(total costs at volume x - fixed component) ÷ x]. In this case: [($1,000 - $600) ÷ 2,000] = $.20. Given this, the utility costs at 5,000 haircuts will be $1,600 ($600 + [5,000 x .20]). At 10,000 haircuts, they will be $2,600 ($600 + [10,000 x .20]). Rent. This was given as $3,000 as long as we don’t exceed 10,000 haircuts. To summarize, the cost figures are all three levels are as follows: ____________________________________________________________________________________________________________ David W. Young • Management Accounting for Managers • Chapter 2 Page 30 Copyrighted Material. Do not reproduce without written permission. Barbers Hair supplies Other supplies Utilities Rent Total Average cost per haircut 2,000 Haircuts $11,000 4,000 2,000 1,000 3,000 $21,000 $10.50 5,000 Haircuts $28,600 10,000 3,000 1,600 3,000 $46,200 $9.24 1 0,000 Haircuts $55,000 20,000 4,000 2,600 3,000 $84,600 $8.46 The fact that the per-haircut cost declines as the number of hair...
View Full Document

This document was uploaded on 03/30/2014.

Ask a homework question - tutors are online