Fixed costs including depreciation have increased at Leverage Inc., from $4 million to $5.3 million in an effort to reduce variable costs. What must the new variable cost percentage of sales be to break even from an accounting perspective at $20 million?
A) 69.2%
B) 65.8%
C) 73.5%
D)76.7%

Question

Quizplus · Accepted Answer

Accounting B/E = $20m = $5.3m/(1 - x); x = 0.735, or 73.5%

Fixed Costs Including Depreciation Have Increased at Leverage Inc