Colin Was a Professional Classical Guitar Player Until His Motorcycle

question 107

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: $$\begin{array} { | l | r | } \hline \text { Rent and utilities } & \$ 800 \\\hline \text { Wages and benefits to luthier } & 2,500 \\\hline \text { Other expenses } & 480 \\\hline\end{array}$$ 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.
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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:

Ventral Root

The part of a spinal nerve that is responsible for conveying motor output from the central nervous system to the peripheral organs and muscles.

Interneuron

A neuron variant that carries communication between sensory and motor neurons, essential for reflex actions and neural networks.

Motor Neuron

A neuron that conveys signals from the brain or spinal cord to muscles or glands, initiating movement or action.

Sensory Neuron

A type of neuron that transmits signals from sensory organs or receptors towards the central nervous system, enabling perception.