Amount of sales revenue required to achieve target profit

Assignment Help Financial Accounting

Reference no: EM131217496

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 481

Colin's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales, $0.75 went to cover his fixed costs, and that anything past that point was pure profit.

Colin wishes to earn $5,100 of operating profit each month. Calculate the amount of sales revenue required to achieve the target profit.

A. $37,164

B. $10,133

C. $9,054

D. $12,388

Reference no: EM131217496

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