Colin was a professional classical guitar player until his motorcycle accident that left him disabled. After long months of therapy, he hired an experienced luthier (maker of stringed instruments) and started a small shop to make and sell Spanish guitars. The guitars sell for $700 and the fixed monthly operating costs are as follows: $$\begin{array} { | l | r }
\hline \text { Rent and utilities } & \$ 1,210 \
\hline \text { Wages and benefits to luthier } & 2,500 \
\hline \text { Other expenses } & 481 \
\hline
\end{array}$$ Colin's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales, $0.75 went to cover his fixed costs, and that anything past that point was pure profit.
Colin wishes to earn $5,100 of operating profit each month. Calculate the amount of sales revenue required to achieve the target profit.

Question

Colin was a professional classical guitar player until his motorcycle accident that left him disabled. After long months of therapy, he hired an experienced luthier (maker of stringed instruments) and started a small shop to make and sell Spanish guitars. The guitars sell for $700 and the fixed monthly operating costs are as follows: $$\begin{array} { | l | r } 
\hline \text { Rent and utilities } & \$ 1,210 \
\hline \text { Wages and benefits to luthier } & 2,500 \
\hline \text { Other expenses } & 481 \
\hline
\end{array}$$ Colin's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales, $0.75 went to cover his fixed costs, and that anything past that point was pure profit.
Colin wishes to earn $5,100 of operating profit each month. Calculate the amount of sales revenue required to achieve the target profit.

Quizplus · Accepted Answer

The Answer of Colin was a professional classical guitar player until his motorcycle accident that left him disabled. After long months of therapy, he hired an experienced luthier (maker of stringed instruments) and started a small shop to make and sell Spanish guitars. The guitars sell for $700 and the fixed monthly operating costs are as follows: $$\begin{array} { | l | r } 
\hline \text { Rent and utilities } & \$ 1,210 \
\hline \text { Wages and benefits to luthier } & 2,500 \
\hline \text { Other expenses } & 481 \
\hline
\end{array}$$ Colin's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales, $0.75 went to cover his fixed costs, and that anything past that point was pure profit.
Colin wishes to earn $5,100 of operating profit each month. Calculate the amount of sales revenue required to achieve the target profit.

Colin Was a Professional Classical Guitar Player Until His Motorcycle