Answer to Question #252717 in Electrical Engineering for Aman

Question

Mike’s shear Shop provides 4,000 hair cuts each month at average price of $5.00 per 

haircut. The common costs of operating the store are $12,000 per month. The business is 

considering hiring a photographer who would take pictures of customers after they had their

hair cut. The price of the photographs would be $2.50 and it estimated that 2,000 customers 

would purchase the service each month. The total extra cost of the photographic service is 

1,000 + 1Q per month, where Q is the number of photographs sold.

i) If the decision is to be based on incremental revenue and incremental cost, should the 

service be offered? Explain.

ii) If the decision is to be made on the basis of fully distributed costs and if the $12,000 in 

monthly common costs is to be apportioned based on the revenues from haircuts and 

photo sold each month, should the new service be offered? Why or not?

Answer 1

Dear Aman, your question requires a lot of work, which neither of our experts is ready to perform for free. We advise you to convert it to a fully qualified order and we will try to help you. Please click the link below to proceed: Submit order