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Dear professor,
I’d like to ask you about MCQ 21.5. (BPP Revision Kit, till August 2016)
In the question the variable C/S ratio is 44%.
But, at the answer page, the C/S ratio is 0.56. Please can you explain why is that?
Thank you for your time!
If the variable cost is 44% of sales, then for every $100 sales the variable cost is $44 and therefore the contribution is 100 – 44 = $56.
So the CS ratio is 56/100 = 56% (or 0.56).
(Incidentally you are using a past edition of the Revision Kit. That is no problem because the syllabus has not changed, but be aware that the format of the exam has now changed (with more MCQ’s and fewer long-form questions). You can find a specimen exam on the ACCA website.)
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