Which statement correctly expresses how labor cost percentage is calculated?

Which statement correctly expresses how labor cost percentage is calculated?

• A. Sales divided by labor cost
• B. Labor cost divided by sales
• C. Labor cost minus sales
• D. Sales plus labor cost

Answer: (B)

Labor cost percentage represents the portion of sales that goes to labor costs. It’s calculated by dividing labor cost by sales, and then expressing that fraction as a percentage (multiply by 100). This directly shows how much of each dollar of sales is consumed by labor. For example, if labor cost is $50,000 and sales are $200,000, the labor cost percentage is 50,000 / 200,000 = 0.25, or 25%. Dividing sales by labor cost would give the inverse and not the share of revenue used by labor, while adding or subtracting the two numbers does not express a proportional relationship.

Labor cost percentage represents the portion of sales that goes to labor costs. It’s calculated by dividing labor cost by sales, and then expressing that fraction as a percentage (multiply by 100). This directly shows how much of each dollar of sales is consumed by labor. For example, if labor cost is $50,000 and sales are $200,000, the labor cost percentage is 50,000 / 200,000 = 0.25, or 25%. Dividing sales by labor cost would give the inverse and not the share of revenue used by labor, while adding or subtracting the two numbers does not express a proportional relationship.