Fixed costs including depreciation have increased at Leverage, Inc.from $4 million to $6 million in an effort to reduce variable costs.What must the new variable-cost percentage be to leave break-even at $20 million?
A)60 percent
B)65 percent
C)70 percent
D)75 percent Old: = $20 million
$\rightarrow$ Variable costs = 80%
New: = $20 million
X = 30%

Question

Quizplus · Accepted Answer

To maintain the break-even point at $20 million with increased fixed costs, the new variable-cost percentage must be 70%. This is calculated by adjusting the variable costs to account for the increased fixed costs while keeping the total costs at the break-even sales level.

Fixed Costs Including Depreciation Have Increased at Leverage, Inc →\rightarrow→ Variable Costs = 80% New: = $20 Million X =

Fixed Costs Including Depreciation Have Increased at Leverage, Inc $\rightarrow$ Variable Costs = 80%
New: = $20 Million
X =