Question
Charli was a professional classical guitar player until his motorcycle accident that left him disabled. After long months of therapy, he hired an experienced luthier
Charli 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 $700 and the fixed monthly operating costs are as follows:
Rent and utilities | $1,210 |
Wages and benefits to luthier | 2,500 |
Other expenses | 480 |
Charli's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales, $0.65 went to cover his fixed costs, and that anything past that point was pure profit.
Charli wishes to earn $4,000 of operating profit each month. Calculate the number of guitars Colin will have to sell to achieve the target profit.
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