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15 August, 23:46

Fixed costs including depreciation have increased at Leverage Inc., from $4 million to $5.3 million in an effort to reduce variable costs. What must the new variable cost percentage of sales be to break even from an accounting perspective at $20 million?

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  1. 16 August, 02:05
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    VC% = 73.5%

    The New variable cost percentage of sales = 73.5%

    Explanation:

    Given;

    New Fixed cost = $5.3 million

    Total cost = $20 million

    Total variable cost = $20 - $5.3 = $14.7 million

    Variable cost percent = (total variable cost/total cost) * 100%

    VC% = (14.7/20) * 100%

    VC% = 73.5%
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