Colin Was a Professional Classical Guitar Player Until His Motorcycle

question 76

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, $0.60 went to cover his fixed costs, and that anything past that point was pure profit. Colin is planning to increase the selling price to $820. What impact will the increase in selling price have on the breakeven point in units?

• A)It will stay the same.
• B)It will go down from 11 to 9 units.
• C)It will go up from 9 to 12 units.
• D)It will go down from 9 to 7 units.

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Definitions:

Direct Contributions

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Taft-Hartley Act

A 1947 federal law that imposed several restrictions on labor unions, including prohibiting certain types of strikes and requiring union leaders to swear they were not communists.

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