Refer to Desjardin Tools. What is the variable cost ratio?
A) 19%
B) 42%
C) 50%
D) 54%

Question

Quizplus · Accepted Answer

According to the Desjardin Tools case study, the variable costs for producing the tools are $42 per unit, while the selling price is $100 per unit. Therefore, the variable cost ratio is 42% ($42 variable cost ÷ $100 selling price). To maximize profits, the company should focus on producing and selling the tools with the highest contribution margin, which is calculated by subtracting the variable costs from the selling price. Based on this, the best choice(s) would be those products that have the highest contribution margin. However, the specific products or combination of products that yield the highest contribution margin cannot be determined without additional information about their variable costs and selling prices.