Charli 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: Rent and utilities $1,210 Wages and benefits to luthier 2,500 Other expenses 480 Charli's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales, $0.65 went to cover his fixed costs, and that anything past that point was pure profit. Charli wishes to earn $4,000 of operating profit each month. Calculate the number of guitars Colin will have to sell to achieve the target profit.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
) Charli 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:
|
Rent and utilities |
$1,210 |
|
Wages and benefits to luthier |
2,500 |
|
Other expenses |
480 |
Charli's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales, $0.65 went to cover his fixed costs, and that anything past that point was pure profit.
Charli wishes to earn $4,000 of operating profit each month. Calculate the number of guitars Colin will have to sell to achieve the target profit.
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