Bpp mock 4

Currently the operating costs are $80m, and this is the total of both variable and fixed costs. Given that the fixed costs / variable costs = 1/3 (33.33%), then for every $3 of variable costs there are fixed costs of $1 and so total costs of $4. So the fixed costs are 1/4 of the total and are here 1/4 x $80m = $20m and the variable costs are $60m. If sales increase by 15%, the contribution will increase by 15% and will be (100 - 60) x 1.15 = 46m, and so the profit will be 46 - 20 = $26m