Colin Was a Professional Classical Guitar Player Until His Motorcycle

question 40

Multiple Choice

Colin 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: Colin's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales, $0.75 went to cover his fixed costs, and that anything past that point was pure profit. Colin wishes to earn $5,100 of operating profit each month. Calculate the amount of sales revenue required to achieve the target profit.

• A)$37,164
• B)$9,054
• C)$12,388
• D)$10,133

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Definitions:

Market Price

The current market rate at which one can purchase or sell a service or asset.

Acquisition

The procedure through which a business buys out most or all shares of another business to achieve authority over it.

Stockholders

Individuals or entities that own shares of stock in a corporation, giving them partial ownership of the company.

Acquiring Firms

Companies involved in the process of buying or merging with other companies to increase their size and capabilities.