Question

Paule Company manufactures computers. The budgeted sales are $300,000, budgeted variable costs are $153,000, and budgeted fixed costs are $270,000. Calculate the variable cost ratio.

Answer 1

The variable cost ratio for Paule Company is calculated by dividing the budgeted variable costs of $153,000 by the budgeted sales of $300,000, resulting in a ratio of 51%.

Step-by-step explanation:

To calculate the variable cost ratio for Paule Company, we divide the company's budgeted variable costs by the budgeted sales and then multiply by 100 to get a percentage. The formula to find the variable cost ratio is (Variable Costs / Sales) × 100. Given that the budgeted sales are $300,000, and the budgeted variable costs are $153,000, the variable cost ratio calculates as follows:

Variable Cost Ratio = ($153,000 / $300,000) × 100 = 51%

Therefore, the variable cost ratio for Paule Company is 51%. This ratio indicates that for every dollar of sales Paule Company makes, 51 cents go towards covering the variable costs.