Company A has 50% of its total variable manufacturing cost in labor and the other 50% in fuel. Company B has 10% of its total variable manufacturing cost in labor and the remainder in fuel. Suppose in a given year, labor costs rise 6% and fuel costs rise 10%.
1) Using the information above, calculate the percentage increase in total variable cost for each company.
Percentage Increase in total variable costs:
Company A:
Company B:
2) Which company has higher percentage increase in total variable cost?