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Selling price is 30 per unit and variable cost is 15 per unit. The P/V ratio is
A25 per cent
B50 per cent
C75 per cent
D15 per cent
Answer & Solution
Correct answer: B. 50 per cent
1. Contribution per unit = 30 - 15 = 15.
2. P/V ratio = contribution divided by sales, expressed as a percentage.
3. P/V ratio = (15 / 30) x 100 = 50 per cent.
4. Half of every rupee of sales is therefore available for fixed cost and profit.
_Source: ICAI Cost and Management Accounting Ch14 'Marginal Costing', section 14.7.2_
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