Phoenix Was a Professional Classical Guitar Player Until a Motorcycle

question 123

Multiple Choice

Phoenix 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 $700,and the fixed monthly operating costs are as follows: $$\begin{array} { | l | r | } \hline \text { Rent and utilities } & \$ 810 \\\hline \text { Wages and benefits to luthier } & 2500 \\\hline \text { Other expenses } & 480 \\\hline\end{array}$$ Phoenix's accountant told him about contribution margin ratios,and Phoenix understood clearly that for every dollar of sales,$0.60 went to cover his fixed costs,and anything above that point was profit.
Phoenix is planning to increase the sales price to $750.What impact will the increase in sales price have on the contribution margin ratio?

• A) It will stay the same.
• B) It will increase to 53.33%.
• C) It will increase to approximately 62.67%.
• D) It will decrease to approximately 49.33%.

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Definitions:

Crustal Material

Any geological materials that make up the crust of the Earth, encompassing rocks, minerals, and sediments.

Lithosphere

The lithosphere is the rigid, outer layer of the Earth, comprising the crust and the upper part of the mantle.

Elevation

The height of a location above a specific reference point, usually above sea level.

Deformation

The alteration of the shape or size of rocks due to stress or strain, including processes like folding, faulting, and shearing.