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:

Units of Output

The quantity of goods or services produced by a company, industry, or economy within a specific period.

Marginal Revenues

The extra earnings accrued by selling an additional unit of a good or service.

Purely Competitive Firm

A company operating in a market with many buyers and sellers, where no single entity can influence the price of its product.

Total Revenues

The overall revenue a business secures from its goods or service transactions, before removing any spending.