Question

Can you please give me 1 example on how would the variable expenses increase as a percentage of the selling price ?

Answer 1

--Yes, Variable expense increases as a % of sale. This is because Variable expenses are infact 'variable' in totality, although they remain fixed as 'per unit' basis.

--If Variable expense are 40% of Sales, considering everything stays the same, no matter how much sales increases or decreases, the variable cost will be always 40% of sales.

--Consider the following example:

A	Sale price per unit	$20
B	Variable cost per unit	$15
C = (B/A) x 100	Variable cost as % of sale	75%

A	Units sold	10,000	5,000	15,000
B	Sales revenue [Units x $ 20]	$200,000	$100,000	$300,000
C	Variable cost [Units x $ 15]	$150,000	$75,000	$225,000
D = (C/B) x 100	Variable cost as % of sale	75%	75%	75%