Variable Costs as a Percentage of Sales for Protoveo Inc

question 3

Multiple Choice

Variable costs as a percentage of sales for Protoveo Inc.are 65%, sales are $500,000, and fixed costs are $125,000.How much would operating income change if sales decrease by $10,000?

• A) $3,500 increase
• B) $3,500 decrease
• C) $3,250 decrease
• D) $3,500 increase.

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Definitions:

Denominator Level

In cost accounting, it refers to the base level of activity or volume used to calculate fixed costs per unit.

Standard Hours

The expected amount of time it should take to complete a task or process under normal conditions.

Target Denominator Level

A predetermined level of activity (such as machine-hours or labor-hours) used to allocate fixed overhead costs to individual units of production.

Volume Variance

A metric that measures the difference between the budgeted and actual volume of production or sales, often reflecting changes in demand or efficiency.