Phoenix was a professional classical guitar player until a motorcycle accident left 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 $705,and the fixed monthly operating costs are as follows: Rent and utilities $810 Wages and benefits to luthier $2,510 Other expenses $480 Phoenix's accountant told him about contribution margin ratios, and Phoenix understood clearly that for every dollar of sales, $0.60 went to cover his fixed costs, and anything above that point was profit. Phoenix is planning to increase the sales price to $760. What impact will the increase in sales price have on the contribution margin ratio?
Phoenix was a professional classical guitar player until a motorcycle accident left 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 $705,and the fixed monthly operating costs are as follows: Rent and utilities $810 Wages and benefits to luthier $2,510 Other expenses $480 Phoenix's accountant told him about contribution margin ratios, and Phoenix understood clearly that for every dollar of sales, $0.60 went to cover his fixed costs, and anything above that point was profit. Phoenix is planning to increase the sales price to $760. What impact will the increase in sales price have on the contribution margin ratio?
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Phoenix was a professional classical guitar player until a motorcycle accident left 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 $705,and the fixed monthly operating costs are as follows:
|
Rent and utilities
|
$810
|
|
Wages and benefits to luthier
|
$2,510
|
|
Other expenses
|
$480
|
Phoenix's accountant told him about contribution margin ratios, and Phoenix understood clearly that for every dollar of sales, $0.60 went to cover his fixed costs, and anything above that point was profit. Phoenix is planning to increase the sales price to $760.
What impact will the increase in sales price have on the contribution margin ratio?
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