Final answer:
To determine the break-even contribution margin ratio, divide the fixed overhead of $92,000 by the revenues of $450,000, which results in a ratio of 0.2044, correlating with option a). This ratio is essential for understanding how much revenue contributes to fixed costs after variable costs.
Step-by-step explanation:
The break-even contribution margin ratio for a company can be determined by dividing its fixed overhead by its revenues. In this case, the fixed overhead is $92,000 and the revenues are $450,000. To calculate the ratio, we use the formula:
Break-even Contribution Margin Ratio = Fixed Overhead / Revenues
Substituting the given values, we get:
Break-even Contribution Margin Ratio = $92,000 / $450,000
This calculation results in a break-even contribution margin ratio of 0.2044, which is option a).
This ratio indicates the percentage of revenue that is available to cover fixed costs (overhead) after variable costs have been paid. A higher ratio suggests a more substantial contribution to fixed costs from each dollar of sales