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Home Q & A Board Other Fields Homework Help Business Accounting
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7 years ago
Luca 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 $700, and the fixed monthly operating costs are as follows:

Rent and utilities   $810
Wages and benefits to luthier   2,500
Other expenses   480

Luca's accountant told him about contribution margin ratios, and Luca understood clearly that for every dollar of sales, $0.60 went to cover his fixed costs, and anything above that point was profit.

Luca is planning to increase the sales price to $750. What impact will the increase in sales price have on the contribution margin ratio?
A) It will stay the same.
B) It will increase to approximately 62.67%.
C) It will increase to 53.33%.
D) It will decrease to approximately 49.33%.
Textbook 
Horngren's Financial & Managerial Accounting, The Financial Chapters

Horngren's Financial & Managerial Accounting, The Financial Chapters


Edition: 5th
Authors:
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7 years ago
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Deprecated Author
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#2
7 years ago
Will mark this subject solved, thanks
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#3
3 years ago
thanks
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