When the total variable costs are deducted from total mixed costs, we obtain:
A. variable cost per unit. B. mixed cost per unit. C. total highminus-low costs. D. total fixed costs.
Colin 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
|
Colin'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. Colin 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.
A. 33 guitars B. 15 guitars C. 18 guitars D. 39 guitars