Floyd's Barbershop has fixed costs of $3000 per month.Floyd currently breaks even when it performs 400 haircuts a month.Floyd charges customers $10 per cut.What are Floyd's variable costs per cut?

Question

Quizplus · Accepted Answer

To calculate Floyd's variable cost per cut, we need to first find Floyd's total cost at the breakeven point.

At the breakeven point, Floyd performs 400 haircuts, so their total revenue is 400 haircuts x $10 per cut = $4000.

We know their fixed costs are $3000 per month, which means their total variable costs at the breakeven point must be $1000 ($4000 - $3000).

If we divide the total variable costs by the number of haircuts, we get the variable cost per cut:

$1000 ÷ 400 haircuts = $2.50 per cut

Therefore, the correct answer is A) $2.50.

Floyd's Barbershop Has Fixed Costs of $3000 Per Month