Zeke Was a Professional Classical Guitar Player Until a Motorcycle

question 5

Multiple Choice

Zeke was a professional classical guitar player 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 $800,and the fixed monthly operating costs are as follows: $$\begin{array} { | l | r | } \hline \text { Rent and utilities } & \$ 700 \\\hline \text { Wages and benefits to luthier } & 2300 \\\hline \text { Other expenses } & 479 \\\hline\end{array}$$ Zeke's accountant told him about contribution margin ratios,and Zeke understood clearly that for every dollar of sales,$0.75 went to cover his fixed costs,and anything above that point was profit.
Zeke wishes to earn $5100 of operating profit each month.Calculate the amount of sales revenue required to achieve the target profit.(Round your answer to the nearest dollar.)

• A) $4639
• B) $13,916
• C) $11,439
• D) $34,316

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Definitions:

Unique Risk

Also known as unsystematic risk, it refers to the risk associated with a specific company or industry.

Diversifiable Risk

The portion of an investment's risk that can be reduced or eliminated through the practice of diversifying one's investment portfolio across various assets.

Systematic Risk

The inherent risk affecting the overall market or a particular sector, which cannot be eliminated through diversification.

Market Risk

The risk of losses in investments due to factors that affect the entire market or asset class, such as economic changes or political events.