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8 years ago
Joshua 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:

Rent and utilities   $600
Wages and benefits to luthier   2,300
Other expenses   479

Joshua's accountant told him about contribution margin ratios, and Joshua 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 Joshua need to sell each month to break even? (Round your answer up to the nearest whole guitar.)
A) 3 guitars
B) 8 guitars
C) 7 guitars
D) 5 guitars
Textbook 
Horngren's Financial & Managerial Accounting, The Financial Chapters

Horngren's Financial & Managerial Accounting, The Financial Chapters


Edition: 5th
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8 years ago
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8 years ago
Makes perfect sense, thx
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