Reference no: EM13573652

Coin was a professional classical guitar player until his motorcycle accident that left him disabled. After long months of therapy he hired a luthier and started to make and sell Spanish guitars. They sell for $700 and the fixed monthly operating cossts are:

• rent and utilities: 800$
• wages and benefits to luthier: 2500
• other expenses: 480

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 thhat point was pure profit.

a.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

1. it will go down from 11 to 9 units
2. it will go down from 9 to 7 units
3. it will go up from 9 to 12 units
4. it will stay the same

b.Colin is planning to increase the selling price to $750 what impact will the increase in selling price have on the contribution margin ratio?

1. it will go down from 70% to approximately 67%
2. it will go up 70% to 75%
3. it will go up from 60% to 63%
4. it will stay the same

c.How many guitars does Colin have to sell each month to break even

1. 14 guitars
2. 7 guitars
3. 6 guitars
4. 9 guitars