Ethan Was a Professional Classical Guitar Player Until a Motorcycle

question 63

Multiple Choice

Ethan 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 $600,and the fixed monthly operating costs are as follows: $$\begin{array} { | l | r | } \hline \text { Rent and utilities } & \$ 600 \\\hline \text { Wages and benefits to luthier } & 2,200 \\\hline \text { Other expenses } & 470 \\\hline\end{array}$$ Ethan's accountant told him about contribution margin ratios,and Ethan understood clearly that for every dollar of sales,$0.60 went to cover his fixed costs,and anything above that point was profit.
Ethan wishes to earn $5,000 of operating profit each month.Calculate the amount of sales revenue required to achieve the target profit.(Round your answer to the nearest dollar. )

• A)$5,450
• B)$8,175
• C)$13,784
• D)$20,675

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Definitions:

Activity-Based Costing

A method of cost accounting that assigns costs to products or services based on the resources they consume.

Manufacturing Overhead

The indirect costs associated with manufacturing, such as utilities, maintenance, and salaries not directly involved in production.

Time-Driven

Refers to activities or processes whose scheduling or execution is strictly influenced by the passage of time.

Total Minutes

The complete count of minutes accumulated across a specified timeframe, often used in time tracking or productivity analysis.