Eusey Company requires sales of $2,000,000 to cover its fixed costs of $700,000 and to earn net income of $500,000. What percent are variable costs of sales?

Question

Quizplus · Accepted Answer

Total costs = fixed costs + variable costs

Net income = Sales - Total costs

$500,000 = $2,000,000 - (variable costs + $700,000)

Variable costs = $800,000

Variable costs as a percentage of sales = (variable costs / sales) x 100
= ($800,000 / $2,000,000) x 100
= 40%

Eusey Company Requires Sales of $2,000,000 to Cover Its Fixed