Fixed Costs Including Depreciation Have Increased at Leverage, Inc

question 115

Multiple Choice

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

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Definitions:

Consumption

The consumption of products and services by families.

Income

The monetary payment received for goods or services, or from other sources, as rents or investments.

Interest Rate

The percentage of a sum of money charged for its use, which reflects the cost of borrowing or the return on savings.

Utility Function

A mathematical representation that ranks an individual's preferences over a set of goods and services, aiming to measure satisfaction or happiness.