Contribution to Sales Ratio Components

Steps:

• Recall the formula: Contribution to sales ratio = (Sales revenue - Variable costs) / Sales revenue.
• Identify key elements: Only sales revenue and variable costs appear in the numerator and denominator.
• Eliminate options with fixed costs, as they are excluded from contribution calculations.
• Check for sales volume: It affects total figures but not the ratio percentage.

Why C is correct:

• The ratio formula directly uses variable costs subtracted from sales revenue, then divided by sales revenue, per standard cost-volume-profit analysis.

Why the others are wrong:

• A: Fixed costs are irrelevant, as the ratio focuses on variable costs only.
• B: Sales volume is not part of the ratio calculation; it's used for total contribution, not the percentage.
• D: Includes fixed costs and sales volume, both extraneous to the ratio formula.

Final answer: C