Juan Martinez Played Classical Guitar Professionally Until His Motorcycle Accident

question 161

Multiple Choice

Juan Martinez played classical guitar professionally until his motorcycle accident left him disabled. After long months of therapy, he hired an experienced luthier (maker of stringed instruments) and opened a small shop that makes and sells Spanish guitars. The guitars sell for $600, and the fixed monthly operating costs are as follows:
$$\begin{array} { l r } \text { Rent and utilities } & \$ 960 \\\text { Wages and benefits of luthier } & \$ 1,500 \\\text { Other } & \$ 900\end{array}$$
-Juan got confused when his accountant told him about contribution margin ratios, but he understood clearly that for every dollar of sales, $0.70 went to cover his fixed costs, and that anything past that point was pure profit.
Juan wishes to make $2,500 of operating profit each month. If so, how much sales revenue will Juan have to make?

• A) $8,760
• B) $8,140
• C) $8,400
• D) $7,960

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Definitions:

Open Door Note

A series of policy statements issued by the United States in the late 19th and early 20th centuries advocating for equal privileges among countries trading with China.

Boxer Rebellion

An uprising in China (1899-1901) by the "Boxers" aiming to rid the country of foreign influence and Christian missions.

Buffalo Soldiers

Nickname for the African American soldiers who served in the U.S. Army's 10th Cavalry Regiment after the Civil War, playing a significant role in the American West.

Black Troops

African American soldiers, especially those who served in the United States armed forces during the Civil War and other conflicts, often facing segregation and discrimination.