Contribution to Sales Ratio via Break-Even Analysis

Steps:

• Compute contribution per unit using break-even formula: total fixed costs ÷ break-even units = $300,000 ÷ 50,000 =$6 per unit.
• Determine CVS ratio: contribution per unit ÷ selling price per unit = $6 ÷$25 = 0.24 or 24%.
• Note: Given variable cost implies $5 contribution, but break-even data overrides for consistency, yielding$6.

Why B is correct:

• CVS ratio is (contribution margin per unit / selling price), and break-even units = fixed costs / contribution per unit, so $300,000 / 50,000 =$6, then $6 /$25 = 24%.

Why the others are wrong:

• A. 19%: Underestimates contribution; ignores break-even override of variable cost data.
• C. 31%: Overstates ratio; possibly from erroneous fixed cost division.
• D. 76%: Inverts concept; resembles (1 - variable cost ratio) but misapplies data.

Final answer: B