Figure 4-1.Foster Company makes power tools. The budgeted sales are $420,000, budgeted variable costs are $147,000, and budgeted fixed costs are $227,500.
-Refer to Figure 4-1. What is the variable cost ratio?

Question

Quizplus · Accepted Answer

The variable cost ratio is calculated by dividing the budgeted variable costs by the budgeted sales.

Variable cost ratio = Budgeted variable costs / Budgeted sales

= $147,000 / $420,000

= 0.35 or 35%

Therefore, the variable cost ratio is 35%. The best choice is B.