P/V Ratio.

Q75. What is P/V Ratio? How it can be improved? How is the use of P/V ratio?
Ans. Profit Value Ratio(P/V Ratio) is the relationship between the contribution and sales value. It is expressed as a percentage of contribution over sales.
P/V Ratio can be improved:

  1. By reducing variable cost per unit.
  2. By increasing selling per unit.
  3.  By increasing the output of those units having a higher P/V ratio and by reducing the output of those units having a low P/V ratio.

Uses of P/V ratio:

  1.  Determine variable cost for any volume of sales.
  2. Measure the efficiency or to choose a most profitable line.
  3. Determine Break Even Point.

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