Question

P/V ratio is

• A. \(\dfrac{\text{Contribution}}{\text{Sales}} \times 100\)
• B. \(\dfrac{\text{Sales}}{\text{Contribution}} \times 100\)
• C. \(\dfrac{\text{Contribution}}{\text{Sales}}\)
• D. None of these

Hint:

Higher P/V ratio = higher profitability from sales.

Answer 1

The Correct Option is A

Step 1: Meaning of P/V ratio.
Profit-Volume (P/V) ratio indicates the relationship between contribution and sales.
Step 2: Formula.
\[ P/V \ ratio = \dfrac{\text{Contribution}}{\text{Sales}} \times 100 \] Step 3: Option analysis.
- (A) Correct formula.
- (B) Wrong, reciprocal form.
- (C) Correct relation but incomplete (percentage missing).
- (D) Wrong.
Step 4: Importance.
It shows how sales affect contribution and profitability, used in break-even analysis.
Step 5: Conclusion.
P/V ratio is \(\dfrac{\text{Contribution}}{\text{Sales}} \times 100\).