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Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663

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BuyFindarrow_forward

Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663
Chapter 16, Problem 6DQ
Textbook Problem
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What is the variable cost ratio? The contribution margin ratio? How are the two ratios related?

To determine

Describe and relate variable cost ratio and contribution margin ratio.

Explanation of Solution

Variable Cost: Variable costs refer to the costs that are involved in the production, and vary as per the changes in the volume of production.

Variable Cost Ratio: Variable cost ratio shows the amount of variable cost in the total amount of sales. The formula for variable cost ratio is shown below:

Variable cost ratio = Variable CostsSales

Contribution Margin: The contribution margin refers to the process or the theory that is used to judge the benefit generated from each unit of the goods produced.

Contribution Margin Ratio: The contribution margin ratio shows the amount of difference in the actual sales value and the variable expenses in percentage

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Chapter 16 Solutions

Cornerstones of Cost Management (Cornerstones Series)
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