Adam 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 $900 and the fixed monthly operating costs are as follows: $$\begin{array} { | l | r | }
\hline \text { Rent and utilities } & \$ 800 \
\hline \text { Wages and benefits to luthier } & 3,000 \
\hline \text { Other expenses } & 500 \
\hline
\end{array}$$ Adam's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales,$0.60 went to cover his fixed costs,and that anything past that point was pure profit.
How many guitars does Adam have to sell each month to break even?
A) 6 guitars
B) 5 guitars
C) 7 guitars
D) 8 guitars

Question

Adam 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 $900 and the fixed monthly operating costs are as follows: $$\begin{array} { | l | r | } 
\hline \text { Rent and utilities } & \$ 800 \
\hline \text { Wages and benefits to luthier } & 3,000 \
\hline \text { Other expenses } & 500 \
\hline
\end{array}$$ Adam's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales,$0.60 went to cover his fixed costs,and that anything past that point was pure profit.
How many guitars does Adam have to sell each month to break even?
A) 6 guitars
B) 5 guitars
C) 7 guitars
D) 8 guitars

Quizplus · Accepted Answer

The Answer of Adam 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 $900 and the fixed monthly operating costs are as follows: $$\begin{array} { | l | r | } 
\hline \text { Rent and utilities } & \$ 800 \
\hline \text { Wages and benefits to luthier } & 3,000 \
\hline \text { Other expenses } & 500 \
\hline
\end{array}$$ Adam's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales,$0.60 went to cover his fixed costs,and that anything past that point was pure profit.
How many guitars does Adam have to sell each month to break even?
A) 6 guitars
B) 5 guitars
C) 7 guitars
D) 8 guitars

Adam Was a Professional Classical Guitar Player Until His Motorcycle