What is ratio of variable cost in SAP CO-PA - Profitability Analysis?

SAP Term: ratio of variable cost

• Component: CO-PA

• Component Name: Profitability Analysis

• Description: Is the ratio of variable cost as part of the total cost. Example: When you produce 1 bike, you need 1 set of tires. To produce 100 bikes, you need 100 sets of tires. In the latter case, the variable cost ratio increases because the fixed cost stays the same.

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• Key Concepts: 
  The ratio of variable cost is a measure of the cost of a product or service that changes in relation to the amount of production or services provided. In SAP CO-PA Profitability Analysis, this ratio is used to calculate the profitability of a product or service. It is calculated by dividing the total variable costs by the total sales revenue. 
  
  How to use it: 
  In SAP CO-PA Profitability Analysis, the ratio of variable cost can be used to determine the profitability of a product or service. To calculate this ratio, first enter the total variable costs and total sales revenue into the system. Then, divide the total variable costs by the total sales revenue to get the ratio of variable cost. 
  
  Tips & Tricks: 
  When calculating the ratio of variable cost, it is important to ensure that all costs are accounted for. This includes both direct and indirect costs associated with producing and selling a product or service. Additionally, it is important to ensure that all sales revenue is included in the calculation. 
  
  Related Information: 
  The ratio of variable cost can be used in conjunction with other measures such as gross margin and operating margin to gain a better understanding of a product or service’s profitability. Additionally, it can be used to compare different products or services in order to determine which one is more profitable.