Zeke wishes to earn $5100 of operating profit each month. Calculate the amount of sales revenue required to achieve the target profit. (Round your answer to the nearest dollar.)
Zeke 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 $800, and the fixed monthly operating costs are as follows:
Zeke's accountant told him about contribution margin ratios, and Zeke understood clearly that for every
dollar of sales, $0.75 went to cover his fixed costs, and anything above that point was profit.
A) $4639
B) $13,916
C) $11,439
D) $34,316
C) $11,439
Required sales in dollars = (Fixed costs + Target profit) / Contribution margin ratio
Contribution margin ratio = 75%
Total fixed costs = $700 + $2300 + $479 = $3479
Target profit = $5100
Required sales in dollars = ($3479 + $5100) / 75% = $11,439
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