Fixed costs including depreciation have increased at Leverage Inc.,from $4 million to $5.3 million.Suppose that the company now breaks even on an accounting basis with sales of $20 million.What must be the break-even variable cost as a percentage of sales?
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