Question

Improvement of profit-volume ratio can be done by________.

• A. Increasing selling price
• B. Altering sales mixture
• C. Reducing variable cost
• D. All of the above

Answer 1

The correct option is D All of the above

Profit-volume ratio(P/V ratio) = Contribution/Sales

Contribution is the excess of sales over the variable cost.

1. If the selling price is increased and the variable cost is constant then, the contribution would be increase and so would the P/V ratio.
2. If the sales mixture is altered and the product with high contribution is sold more then the total contribution would increase and so would the P/V ratio.
3. If the selling price remains constant but the variable cost is reduced then the contribution would increase and so would the P/V ratio.