Question

1 point 7. If Sales 200000, Variable Cost 100000 and Fixed Cost 50000 then PV Ratio will be7. Contract price is fixed in advance in case of * A. 30% B. 20% C. 25% D. 50%​

Answer 1

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Answer 2

According to the given question,

PV ratio shall be calculated in the following manner:-

:- Contirbution= Sales - Variable Cost = 200000 - 100000 = 100000

:- EBIT = Contribution - Fixed Cost = 100000 - 50000 = 50000

:- PV Ratio = ( Contribution / Sales ) * 100

                  = ( 50000 / 200000 ) * 100 = 25%

Therefore, PV Ratio (Profit-Volume) Ratio shall be 25%