Which is the value of P/V Ratio?

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:

1. The P/V Ratio (Profit-Volume Ratio) is a key metric in cost-volume-profit (CVP) analysis.

2. It indicates the profitability per unit of sales.

3. A higher P/V Ratio means better profitability, while a lower ratio indicates a high proportion of variable costs.

4. The Break-Even Point (BEP) is also determined using this ratio:

   BEP (Sales) = Fixed Cost / P/V Ratio

5. If the P/V Ratio is constant, profits can be estimated easily with changes in sales.