Question

Use Only the 2017 and 2018 financial data below to estimate the FIXED COST to Variable cost ratio for of goods sold IN 2017. Round to the NEAR whole penny. Use the Hi-Low Method but assume the estimated variable cost is $0.25 per sales dollar.

Year	2016	2017	2018
Total Revenue	5,354,000	6,423,000	7,424,000
Cost of Revenue	2,460,000	2,136,000	2,265,000
Gross Profit	2,894,000	4,287,000	5,159,000
Selling General and Administrative	410,000	395,000	431,000
Total Operating Expenses	3,017,000	2,948,000	3,184,000

Answer 1

The answer has been presented in the supporting shèet. All the parts has been solved with detailed explanation and calculation. For detailed answer refer to the supporting shèet.

Answer 3 Variable cost of goods sold 4 = sales revenue * variable cost of goods sold per sale revenue 5 = 6423000*.25 6 = $ 1605750 8 Fixed cost of goods sold 9 = total cost of goods sold-variable cost of goods sold 10 = 2136000-1605750 11 = $ 530250 13 Thus the ratio 14 = fixed cost of goods sold / variable cost of goods sold 15 = 530250/1605750 16 = 0.33 18 Thus the ratio = 0.33 times