Elliott Was a Professional Classical Guitar Player Until His Motorcycle

question 221

Multiple Choice

Elliott 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 $1,000 and the fixed monthly operating costs are as follows: $$\begin{array} { | l | r | } \hline \text { Rent and utilities } & \$ 1,240 \\\hline \text { Wages and benefits to luthier } & 2,600 \\\hline \text { Other expenses } & 800 \\\hline\end{array}$$ Elliott's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales,$0.90 went to cover his fixed costs,and that anything past that point was pure profit.
Elliott wishes to earn $5,500 of operating profit each month.Calculate the amount of sales revenue required to achieve the target profit.

• A) $4,640
• B) $5,500
• C) $11,267
• D) $6,112

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