Pauley Company provides home health care. Pauley charges $35/hour for professional care. Variable costs are $21/hour and fixed costs are $78,000. Next year, Pauley expects to charge out 12,000 hours of home health care.

What is the variable cost ratio?

a. 40%

b. 33%

c. 67%

d. 60%

e. 50%

Question

Business

Amy Miller

2 March, 08:20

Pauley Company provides home health care. Pauley charges $35/hour for professional care. Variable costs are $21/hour and fixed costs are $78,000. Next year, Pauley expects to charge out 12,000 hours of home health care.

What is the variable cost ratio?

a. 40%

b. 33%

c. 67%

d. 60%

e. 50%

+4

Answers (1)

Know the Answer?

Asa Woodward · Answer 1

the variable cost ratio is 60 % (option d)

Explanation:

The variable cost ratio (VCR) represents the ratio of variable costs to sales. Therefore

VCR = (total variable costs) / (total sales)

since

total variable costs = variable costs * services provided = $21/hour * 12000 hours/year = $252000 / year

total sales = price of service * services provided = $35/hour * 12000 hours/year = $420000 / year

thus

VCR = ($252000 / year) / ($420000 / year) = 0.6 = 60 %

Pauley Company provides home health care. Pauley charges $35/hour for professional care. Variable costs are $21/hour and fixed costs are $78,000. Next year, Pauley expects to charge out 12,000 hours of home health care.What is the variable cost ratio?a. 40%b. 33%c. 67%d. 60%e. 50%

Pauley Company provides home health care. Pauley charges $35/hour for professional care. Variable costs are $21/hour and fixed costs are $78,000. Next year, Pauley expects to charge out 12,000 hours of home health care.

What is the variable cost ratio?

a. 40%

b. 33%

c. 67%

d. 60%

e. 50%