Ajax Was a Professional Classical Guitarist Until a Motorcycle Accident

question 136

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: $$\begin{array} { | l | r | } \hline \text { Rent and utilities } & \$ 600 \\\hline \text { Wages and benefits to luthier } & 2300 \\\hline \text { Other expenses } & 479 \\\hline\end{array}$$ 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

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Definitions:

Linear Regression Model

A mathematical approach that fits a linear equation to observed data to model how a dependent variable changes in relation to one or more independent variables.

Standard Deviation

A statistic that measures the dispersion or variation of a set of values from their mean.

Confidence Interval

A range of values, derived from a data set, within which the true parameter value is estimated to lie with a certain level of confidence.

Expected Value

The weighted average of all possible values of a random variable, weighted by their respective probabilities.