Profit/Volume ratio equals:
AFixed cost / Sales
B(Sales / Contribution) × 100
CVariable cost / Sales
D(Contribution / Sales) × 100
Answer & Solution
Correct answer: D. (Contribution / Sales) × 100
1. P/V ratio expresses contribution as a percentage of sales.
2. Formula: P/V = (Contribution / Sales) × 100.
3. The ratio is independent of total volume so it characterises the cost structure.
4. Hence the correct expression is the first option.
_Source: ICAI BoS Inter Paper 3, Ch 14 "Marginal Costing", §14.4 ¶2_
Related questions
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