Question

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? Answer 35% 54% 89% 19% 50%

Answer 1

The variable cost ratio for Foster Company is calculated by dividing the budgeted variable costs by the budgeted sales and multiplying by 100, which results in 35%.

Step-by-step explanation:

The question is asking to calculate the variable cost ratio for Foster Company, which makes power tools. The variable cost ratio is the percentage of variable costs in relation to sales. To find this, we divide the budgeted variable costs by the budgeted sales and multiply by 100 to get a percentage.

Variable Cost Ratio = (Budgeted Variable Costs / Budgeted Sales) × 100So,Variable Cost Ratio = ($147,000 / $420,000) × 100Variable Cost Ratio = 0.35 × 100Variable Cost Ratio = 35%The variable cost ratio represents the proportion of variable costs to total sales. To calculate the variable cost ratio, we can divide the budgeted variable costs by the budgeted sales and multiply by 100%.Variable Cost Ratio = (Budgeted Variable Costs / Budgeted Sales) x 100%In this case, the variable cost ratio is calculated as ($147,000 / $420,000) x 100% = 35%.Therefore, the correct answer is 35%.