Question

Leonardo was a prolessional classical qutarist untl a motorcycle accidert left him disabied Ater long months of therapy, he hired an experienced luthier and stated a smal shop to make and sell Soanish pas The gutas sel for $700, and the fixed monthly operating costs are as folows Rent and ulities $600 2500 470 Wages and benelits to luthier Other experses p Leonardo's accountant told him about contribution margin ratios, and Leonardo understood cleaty that for every dolar of sales, So 65 went to cover his fed cots, and anything above tht pat w What is the amount of reerue Leanardo should eam each month to break even? (Round your arower to the nearest dolar) OA $10.200 OB $4.7690 O C $5.492 O D. $4.560

Answer 1

Selling Price per unit = $700

Fixed Costs = Rent and Utilities + Wages and Benefits to Luthier + Other Expenses
Fixed Costs = $600 + $2,500 + $470
Fixed Costs = $3,570

Contribution Margin Ratio = 65%

Breakeven Sales = Fixed Costs / Contribution Margin Ratio
Breakeven Sales = $3,570 / 0.65
Breakeven Sales = $5,492

So, Leonardo should earn a revenue of $5,492 to reach breakeven.