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Variable cost ratio = total variable cost / sales. As long as price and variable cost remain the same, these ratios will remain the same. It does not matter if the company sells 10 units or 1 million units, the percentage of each sale that becomes contribution margin or does to cover variable costs is the same.angout Limited, LLC sells one product priced at $40 per unit. The variable costs (direct materials, direct labor, variable overhead and variable selling) is $25 per unit. Calculate the contribution margin per unit, the contribution margin ratio and the variable cost ratio.
Consequently, total cost is fixed costs (FC) plus variable cost (VC), or TC = FC + VC = Kr +wL. Other economic models have the total variable cost curve (and therefore total cost curve) illustrate the concepts of increasing, and later diminishing, marginal returns.abor is the variable input, meaning that the amount of labor used varies with the level of output. In fact, in the short run, the only way to vary output is by varying the amount of the variable input. Labor is denoted L and the per unit cost, or wage rate, is denoted w, so the total variable costs is Lw.