Ajax Was a Professional Classical Guitarist Until a Motorcycle Accident

question 40

Multiple Choice

Ajax was a professional classical guitarist 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 $800, and the fixed monthly operating costs are as follows: $$\begin{array} { | l | r | } \hline \text { Rent and utilities } & \$ 600 \\\hline \text { Wages and benefits toluthier } & 2300 \\\hline \text { Other expenses } & 479 \\\hline\end{array}$$ Ajax's accountant told him about contribution margin ratios, and Ajax understood clearly that for every dollar of sales, $0.60 went to cover his fixed costs, and anything above that point was profit.
How many guitars does Ajax need to sell each month to break even? (Round your answer up to the nearest whole guitar.)

• A) 5 guitars
• B) 3 guitars
• C) 7 guitars
• D) 8 guitars

Understand how product elasticity affects company strategy and consumer demand.

Identify strategies that firms can use to reduce competition and enhance market position.

Assess the implications of cost-reduction strategies on long-term profitability.

Evaluate investment decisions based on the comparison of stock prices to the discounted value of future earnings.

---

Definitions:

Milgram's Obedience Study

A series of social psychology experiments conducted by Stanley Milgram, demonstrating individuals' willingness to obey authority figures, even to the extent of causing harm to others.

Participants

Individuals taking part in a study or research, often used to collect data or test hypotheses.

Self-Esteem

is the perception that an individual has about their own worth and value, often influencing their confidence and behaviors.

Regretted

Felt sorrow or remorse for an action taken, decision made, or an opportunity missed.