When unit variable cost falls by ₹2 and selling price is unchanged, P/V ratio:
AStays the same
BDecreases
CIncreases
DBecomes negative
Answer & Solution
Correct answer: C. Increases
1. Contribution per unit = Selling price − Variable cost.
2. Lowering variable cost while holding price raises contribution per unit.
3. P/V ratio = Contribution / Sales rises with higher contribution.
4. Hence the P/V ratio increases.
_Source: ICAI BoS Inter Paper 3, Ch 14 "Marginal Costing", §14.4 ¶4_
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