Stauffer Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (8,000 units) $ 320,000 Variable expenses 192,000 Contribution margin 128,000 Fixed expenses 118,400 Net operating income $ 9,600 The variable expense ratio is closest to:

Variable expenses ratio =60%

Explanation:

The variable expense ratio is the percentage of the sales revenue that is incurred as variable cost expenditures. It is used to determined how well a business is managing and controlling costs that vary with the level of activity.

Note that variable costs are those expenditure that vary with level of activity,for example , the higher the level of sales, the more variable expenditures are incurred.

Variable expenses ratio is computed as follows:

Variable expenses ratio = Variable expense/sales revenue × 100

DATA

Variable expense -192,000

Sales revenue-320,00

Variable expenses ratio = 192,000/320,000 ×100 = 60%

Variable expenses ratio =60%

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