Question

contribution of ₹ 300000 and net profit of ₹50000 on sales of ₹9,00,000. Calculate
the Pv ratio of Margin of safety.
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Answer 1

Answer:

Profit Volume ratio is proportion of contribution to sales which signifies the percentage of contribution before considering the fixed cost.

P/V Ratio= Contribution/sales*100

Margin of safety is define as the sales over the break even sales.

Margin of Safety Ratio= Margin of Safety/Actual Sales*100

Profit ratio =Margin of Safety Ratio*P/V Ratio

=50%*20%

=10%.