Question 174150
Contribution Margin = sales - variable costs.

Contribution Margin Ratio = (sales - variable costs)/sales.

 

Contribution margin and contribution margin ratio definition and explanation:
Contribution margin is the amount generated by sales to cover fixed costs.

The contribution margin ratio indicates the percent of sales available to cover fixed costs and profits.

so 100,000-20000=80000 would be our margin in this proposed increase

since the contribution  margin ratio is 25%: 80000(.25)=20000
:
so C would be our answer.