please explain the answer 4) Elliott was a professional classical guitar player

Question

please explain the answer

4) Elliott was a professional classical guitar player until his motorcycle accident that left him disabled. After long months of therapy, he hired an experienced luthier (maker of stringed instruments) and started a small shop to make and sell Spanish guitars. The guitars sell for $1,000 and the fixed monthly operating costs are as follows: Rent and utilities Wages and benefits to luthier Other expenses 1,240 2,600 800 clearly that for every dollar of sales, $0.90 went to cover his fixed costs, and that anything past that point was pure profit. Elliott wishes to earn $5,500 of operating profit each month. Calculate the amount of sales revenue required to achieve the target profit. 4) A) $11,267 5) Magnolia, Inc. has budgeted sales for the first quarter of the next year to be 40,000 units. The inventory on hand at the beginning of quarter is 10,000 units. The desired ending inventory is 4,000 units. Calculate the budgeted production for the first quarter. 5) A) 34,000 units

Explanation / Answer

4) Contribution margin per unit = .90 Break even point = (total fixed cost +target profit)/contribution per unit (4,640 +5,500)/.9 11266.67 or 11267 5) Budgeted production budgeted sales 40,000 Add:Ending inventory 4,000 total needs 44,000 less:opening inventory -10,000 production required 34,000 34,000 units

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