Slate Was a Professional Classical Guitar Player Until a Motorcycle

question 154

Multiple Choice

Slate was a professional classical guitar player until a motorcycle accident at 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 each,and the fixed monthly operating costs are as follows: $$\begin{array} { | l | r | } \hline \text { Rent and utilities } & \$ 810 \\\hline \text { Wages and benefits to luthier } & 2520 \\\hline \text { Other expenses } & 480 \\\hline\end{array}$$ Slate's accountant told him about contribution margin ratios,and Slate understood clearly that for every dollar of sales,$0.60 went to cover his fixed costs,and anything above that point was profit.
Slate is planning to increase the sales price to $820.What impact will the increase in sales price have on the breakeven point in units? (Round your answer up to the nearest whole guitar.)

• A) It will stay the same.
• B) It will go down from 12 to 8 units.
• C) It will go up from 8 to 12 units.
• D) It will go down from 10 to 8 units.

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Definitions:

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