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Pheonix was a professional classical guitar player until a motorcycle accident left him disabled. After long months of therapy, he hired an experienced luthier and
Pheonix 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 $800 Wages and benefits to luthier 2,500 Other expenses 480 Pheonix's accountant told him about contribution margin ratios, and Pheonix understood clearly that for every dollar of sales, $0.60 went to cover his fixed costs, and anything above that point was profit. Pheonix is planning to increase the sales price to $780. What impact will the increase in sales price have on the contribution margin ratio? A. It will increase to 49.74%. B. It will stay the same. C. It will decrease to approximately 43.59%. D. It will increase to approximately 64.1%
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