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:
- By reducing variable cost per unit.
- By increasing selling per unit.
- 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:
- Determine variable cost for any volume of sales.
- Measure the efficiency or to choose a most profitable line.
- Determine Break Even Point.