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Jakob Fletcher was a professional classical guitar player until his motorcycle accident that left him disabled. After long months of therapy, he hired an experienced 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 $800
Wages and benefits to string instrument maker 2,500
Other expenses 480
Jakob's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales, $0.60 went to cover his fixed costs, and that anything past that point was pure profit.
Jakob is planning to increase the selling price to $820. What impact will the increase in selling price have on the breakeven point in units?
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