What Is the Maximum Percentage of Variable Costs to Sales

question 62

Multiple Choice

What is the maximum percentage of variable costs to sales that a firm could have and still break even with $5 million in revenues,$1 million in fixed costs,and $500,000 of depreciation?

• A) 30%
• B) 70%
• C) 80%
• D) 90%

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Definitions:

Sales Increase

Refers to the rise in the amount of goods or services sold by a company over a specific period, showcasing business growth.

Cash Dividends

Payments made by a company from its earnings to its shareholders in the form of cash.

Retained Earnings

Cumulative net earnings or profit of a firm after accounting for dividends; they are reinvested in the core business or to pay debt.

Net Income

The net income of a company once all costs and taxes are deducted from the overall revenue.