This Question: 3 pts11 of 49 (0 complete)his Test: 150 pts poss. Zeke was a prof

Question

This Question: 3 pts11 of 49 (0 complete)his Test: 150 pts poss. Zeke 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 $800, and the fixed monthly operating costs are as follows: Rent and utilities Wages and benefits to luthier 2,300 Other expenses Zeke's accountant told him about contribution margin ratios, and Zeke understood clearly that for every dollar of sales, S0.75 went to cover his fixed costs, and anything above that point was profit. Zeke wishes to earn $5,100 of operating profit each month. Calculate the amount of sales revenue required to achieve the target profit. (Round your answer to the nearest dollar.) $700 479 O A. $34,316 OB. $11.439 O C. $13,916 O D. $4,639

Explanation / Answer

Answer: Option B. $11,439

Total monthly fixed costs = $700 + $2300 + $479 = $3479

Selling price per guitar = $800

Amount from sales of one guitar towards covering fixed costs = $800 x 0.75 = $600

Number of guitars to be sold to cover fixed costs and earn target profit = ($5100 + $3479)/$600 = $8579/$600

Sales revenue required = ($8579/$600 x $800) = $11439

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