Slate was a professional classical guitar player until a motorcycle accident at left him disabled.After long months of therapy,he hired an experienced luthier and started a small shop to make and sell Spanish guitars.The guitars sell for $700 each,and the fixed monthly operating costs are as follows: $$\begin{array} { | l | r | }
\hline \text { Rent and utilities } & \$ 810 \
\hline \text { Wages and benefits to luthier } & 2520 \
\hline \text { Other expenses } & 480 \
\hline
\end{array}$$ Slate's accountant told him about contribution margin ratios,and Slate understood clearly that for every dollar of sales,$0.60 went to cover his fixed costs,and anything above that point was profit.
Slate is planning to increase the sales price to $820.What impact will the increase in sales price have on the breakeven point in units? (Round your answer up to the nearest whole guitar.)
A) It will stay the same.
B) It will go down from 12 to 8 units.
C) It will go up from 8 to 12 units.
D) It will go down from 10 to 8 units.

Question

Slate was a professional classical guitar player until a motorcycle accident at left him disabled.After long months of therapy,he hired an experienced luthier and started a small shop to make and sell Spanish guitars.The guitars sell for $700 each,and the fixed monthly operating costs are as follows: $$\begin{array} { | l | r | } 
\hline \text { Rent and utilities } & \$ 810 \
\hline \text { Wages and benefits to luthier } & 2520 \
\hline \text { Other expenses } & 480 \
\hline
\end{array}$$ Slate's accountant told him about contribution margin ratios,and Slate understood clearly that for every dollar of sales,$0.60 went to cover his fixed costs,and anything above that point was profit.
Slate is planning to increase the sales price to $820.What impact will the increase in sales price have on the breakeven point in units? (Round your answer up to the nearest whole guitar.)
A) It will stay the same.
B) It will go down from 12 to 8 units.
C) It will go up from 8 to 12 units.
D) It will go down from 10 to 8 units.

Quizplus · Accepted Answer

The Answer of Slate was a professional classical guitar player until a motorcycle accident at left him disabled.After long months of therapy,he hired an experienced luthier and started a small shop to make and sell Spanish guitars.The guitars sell for $700 each,and the fixed monthly operating costs are as follows: $$\begin{array} { | l | r | } 
\hline \text { Rent and utilities } & \$ 810 \
\hline \text { Wages and benefits to luthier } & 2520 \
\hline \text { Other expenses } & 480 \
\hline
\end{array}$$ Slate's accountant told him about contribution margin ratios,and Slate understood clearly that for every dollar of sales,$0.60 went to cover his fixed costs,and anything above that point was profit.
Slate is planning to increase the sales price to $820.What impact will the increase in sales price have on the breakeven point in units? (Round your answer up to the nearest whole guitar.)
A) It will stay the same.
B) It will go down from 12 to 8 units.
C) It will go up from 8 to 12 units.
D) It will go down from 10 to 8 units.

Slate Was a Professional Classical Guitar Player Until a Motorcycle