Calculate the ratio of variable-costs-to-sales for a firm with: $3,000,000 accounting break-even revenues, $1.2 million fixed costs, and $450,000 depreciation.(use the values in dollar)
A)40 percent
B)45 percent
C)55 percent
D)60 percent

Question

Quizplus · Accepted Answer

The variable costs can be calculated by subtracting both fixed costs and depreciation from the accounting break-even revenues. So, variable costs = $3,000,000 - $1,200,000 - $450,000 = $1,350,000. The ratio of variable costs to sales is then $1,350,000 / $3,000,000 = 0.45, or 45 percent.

Calculate the Ratio of Variable-Costs-To-Sales for a Firm With: $3,000,000