Martin Was a Professional Classical Guitar Player Until a Motorcycle

question 101

Multiple Choice

Martin 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 $900, and the fixed monthly operating costs are as follows: $$\begin{array} { | l | r | } \hline \text { Rent and utilities } & \$ 800 \\\hline \text { Wages and benefits toluthier } & 2000 \\\hline \text { Other expenses } & 474 \\\hline\end{array}$$ Martin's accountant told him about contribution margin ratios, and Martin understood clearly that for every dollar of sales, $0.65 went to cover his fixed costs, and anything above that point was profit.
Martin wishes to earn $4000 of operating profit each month. Calculate the number of guitars Martin will need to sell to achieve the target profit. (Round your answer up to the nearest whole guitar.)

• A) 3 guitars
• B) 12 guitars
• C) 4 guitars
• D) 13 guitars

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Definitions:

Coefficient on Education

A statistical measure in regression that represents the change in the dependent variable resulting from a one-unit change in the level of education, all else being equal.

Significantly Different

A term used in statistics to indicate that the observed differences between groups or variables are too large to be attributed to chance alone, according to a predefined level of significance.

T-Statistic

A value derived from sample data that is used in a t-test to determine if there is a significant difference between two groups.

Coefficient on Income

A numerical measure, often used in regression analysis, that represents the change in an outcome variable associated with a one-unit change in income.