Correct option is A
The P/V Ratio (Profit-Volume Ratio) is calculated using the formula:
From the given data:
Sales in Period I = ₹7,00,000
Sales in Period II = ₹9,00,000
Profit in Period I = -₹10,000 (Loss)
Profit in Period II = ₹10,000
Now, calculate the Change in Sales:
Change in Sales = 9,00,000 - 7,00,000 = 2,00,000
Calculate the Change in Profit:
Change in Profit = 10,000 - (-10,000) = 10,000 + 10,000 = 20,000
Now, applying the values in the P/V Ratio formula:
Thus, the correct answer is 10%.
Information Booster:
The P/V Ratio (Profit-Volume Ratio) is a key metric in cost-volume-profit (CVP) analysis.
It indicates the profitability per unit of sales.
A higher P/V Ratio means better profitability, while a lower ratio indicates a high proportion of variable costs.
The Break-Even Point (BEP) is also determined using this ratio:
BEP (Sales) = Fixed Cost / P/V Ratio
If the P/V Ratio is constant, profits can be estimated easily with changes in sales.
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