Question

Luca was a protessional classical guitar player until a motorcycle accident lett 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 Wages and benefits to luthier Other expenses $810 2,500 480 Luca's accountant told him about contribution margin ratios, and Luca understood clearly that for every dollar of sales, $0.60 went to cover his fixed costs, and anything above that point was profit. Luca is planning to increase the sales price to $780. What impact will the increase in sales price have on the contribution margin ratio? ○ A. O B. O C. It will decrease to approximately 43.59%. It will increase to approximately 64.1%. It will stay the same. It will increase to 49.74%. D.

Answer 1