P/V ratio (definition) is

P/V ratio (definition) is

• A. The ratio of selling price to variable cost per unit
• B. PV ratio (definition) is
• C. Fixed costs divided by total revenue
• D. A measure of the rate at which profit or contribution is generated with sales volume, as measured by revenue

Answer: (D)

The P/V ratio shows how effectively each unit of revenue turns into contribution (and thus profit). It is calculated as Contribution divided by Sales, or (Selling price minus variable cost) divided by Selling price. This ratio tells you the portion of every sales dollar that is available to cover fixed costs and then to contribute to profit. For example, if the selling price is 50 and the variable cost is 30, the contribution per unit is 20. The P/V ratio is 20/50 = 0.40, or 40%. This means each dollar of revenue leaves 40 cents to cover fixed costs and profit. This concept is used to calculate break-even sales (Fixed costs / P/V ratio) and to assess how changes in sales volume affect profit. The correct description is that the P/V ratio is a measure of the rate at which profit or contribution is generated with sales volume, as measured by revenue. The other options describe different ratios or concepts that don’t match the P/V ratio.

The P/V ratio shows how effectively each unit of revenue turns into contribution (and thus profit). It is calculated as Contribution divided by Sales, or (Selling price minus variable cost) divided by Selling price. This ratio tells you the portion of every sales dollar that is available to cover fixed costs and then to contribute to profit.

For example, if the selling price is 50 and the variable cost is 30, the contribution per unit is 20. The P/V ratio is 20/50 = 0.40, or 40%. This means each dollar of revenue leaves 40 cents to cover fixed costs and profit. This concept is used to calculate break-even sales (Fixed costs / P/V ratio) and to assess how changes in sales volume affect profit.

The correct description is that the P/V ratio is a measure of the rate at which profit or contribution is generated with sales volume, as measured by revenue. The other options describe different ratios or concepts that don’t match the P/V ratio.