Colin Was a Professional Classical Guitar Player Until a Motorcycle

question 8

Multiple Choice

Colin 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: 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 $750.What impact will the increase in selling price have on the contribution margin ratio?

• A)It will stay the same.
• B)It will go up 70% to 75%.
• C)It will go up from 60% to approximately 63%.
• D)It will go down from 70% to approximately 67%.

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Definitions:

Internal Locus of Control

The belief that one's own actions and behaviors are major determinants of life events and outcomes, rather than external forces or chance.

External Locus of Control

The belief that one's successes or failures result from external forces beyond personal control.

Performance Risk

The risk that a product or service will not perform to satisfactory standards, potentially leading to customer dissatisfaction or financial loss.

Reference Group

refers to a group that individuals compare themselves to for self-evaluation, which influences their beliefs, behaviors, and attitudes.