To obtain this result, we need to calculate the current variable costs, determine the variable costs that will result in a DTL ratio of 2.00, and calculate the percentage change.

Step 1: Calculate current variable costs (VC): VC = 0.6 × 500,000 = 300,000

Step 2: Calculate Variable costs needed to decrease the DTL to 2.0:

Rearranging the formula for DTL:

(Sales − Variable Costs) / (Sales − Variable Costs − Fixed Costs − Interest Expense)

results in: 

Variable Costs (VC) = Sales − (2 × Fixed Costs) − (2 × Interest Expense)

= 500,000 − (2 × 120,000) − (2 × 25,000) = 210,000

Step 3: Calculate percentage change:

DVC = (300,000 − 210,000) / 300,000 = 0.30, or 30%.