Coin was a professional classical guitar player until his motorcycle accident that left him disabled. After long months of therapy he hired a luthier and started to make and sell Spanish guitars. They sell for $700 and the fixed monthly operating cossts are:
•Rent and utilities: 800$
•Wages and benefits to luthier: 2500
•Other expenses: 480
Colin'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 thhat point was pure profit.
a. Colin is planning to increase the selling price to $820 what impact will the increase in selling price have on the breakeven point in units
1. It will go down from 11 to 9 units
2. It will go down from 9 to 7 units
3. It will go up from 9 to 12 units
it will stay the same
b. Colin is planning to increase the selling price to $750 what impact will the increase in selling price have on the contribution margin ratio?
1. It will go down from 70% to approximately 67%
2. It will go up 70% to 75%
3. It will go up from 60% to 63%
4. It will stay the same
c. how many guitars does Colin have to sell each month to break even
1. 14 guitars
2. 7 guitars
3. 6 guitars
4. 9 guitars