Ajax was a professional classical guitarist until a motorcycle accident 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, and the fixed monthly operating costs are as follows: Rent and utilities $700 Wages and benefits to luthier 2,400 Other expenses 483 Ajax's accountant told him about contribution margin ratios, and Ajax understood clearly that for every dollar of sales, $0.70 went to cover his fixed costs, and anything above that point was profit. How many guitars does Ajax need to sell each month to break even? (Round your answer up to the nearest whole guitar.) A. 6 guitars B. 8 guitars C. 7 guitars D. 3 guitars
Ajax was a professional classical guitarist until a motorcycle accident 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, and the fixed monthly operating costs are as follows: Rent and utilities $700 Wages and benefits to luthier 2,400 Other expenses 483 Ajax's accountant told him about contribution margin ratios, and Ajax understood clearly that for every dollar of sales, $0.70 went to cover his fixed costs, and anything above that point was profit. How many guitars does Ajax need to sell each month to break even? (Round your answer up to the nearest whole guitar.) A. 6 guitars B. 8 guitars C. 7 guitars D. 3 guitars
Chapter1: Financial Statements And Business Decisions
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Question
Ajax was a professional classical guitarist until a motorcycle accident 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,
and the fixed monthly operating costs are as follows:|
Rent and utilities
|
$700
|
|
Wages and benefits to luthier
|
2,400
|
|
Other expenses
|
483
|
Ajax's accountant told him about contribution margin ratios, and Ajax understood clearly that for every dollar of sales,
$0.70
went to cover his fixed costs, and anything above that point was profit. How many guitars does Ajax need to sell each month to break even? (Round your answer up to the nearest whole guitar.)
6
guitars8
guitars7
guitars3
guitarsExpert Solution
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