Answer:
Instructions are listed below.
Explanation:
Giving the following information:
Head-First Company plans to sell 5,000 bicycle helmets at $75 each in the coming year. The unit variable cost is $45. Fixed factory overhead is $20,000 and fixed selling and administrative expense is $29,500.
To calculate the variable cost ratio, we need to use the following formula:
Variable cost ratio= unitary variable cost / selling price
Variable cost ratio= 45/75= 0.6
The contribution margin rate is the difference between the contribution margin and the selling price:
CM ratio= Contribution margin / selling price
CM ratio= (75 - 45)/ 75= 0.4
