Question

Profit volume ratio is 60% and marginal Cost is Rs. 50. What will be the selling price?

Answer 1

profil =60/100×50
=30
cp=50
sp=cp+profit
=30+50
=80
hence selling price is 80

Answer 2

Answer:

Concept :

The Profit Volume Ratio measures the rate at which profit fluctuates in response to changes in sales volume. It is one of the crucial ratios for determining profitability since it shows the contribution made in relation to sales. Marginal cost refers to the increase or decrease in the cost of producing one more unit or serving one more customer. It is also known as incremental cost.

Explanation:

Given :

Profit volume ratio (PV) = 60%

Marginal Cost (MC)  = Rs.50

To :

Selling Price = ?

Solution :

PV = 60 %

PV = $\frac{contribution}{sales}$

60℅ = $\frac{contribution}{sales}$

Contribution =  Sales - Marginal cost

60%= Sales - $\frac{marginal }{sales}$

Now, let Sales be q

60%= q -  $\frac{MC}{q}$

60%=  q - $\frac{50}{q}$

q* $\frac{60}{100}$ = q - 50

60 q = 100 q - 5000

q = 125

∴ Therefore sales is 125

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