Introduction of the term P-V ratio
Give a brief introduction of the term P/V ratio and Contribution?
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P/V Ratio (or Profit Volume Ratio) is the ratio of contribution to sales that points out the contribution earned with respect to one rupee of sales. It as well evaluates the rate of change of profit because of change in volume of sales. Its essential property is that if per unit sales price and variable cost are steady then P/V Ratio will be steady at all the levels of activities. A change is fixed cost does not influence P/V Ratio. It is evaluated as under: (Contribution * 100) / Sales (Change in profits * 100) / (Change in sales) A high P/V Ratio points out that a small raise in sales without raise in fixed costs will result in higher profits. A low P/V ratio that points to low profitability can be developed by rising selling price, falling marginal costs or selling products having high P/V ratio.
Contribution is the differentiation between variable cost and sales revenue (or also known as variable cost). Variable cost is the significant cost in deciding profitability as fixed costs are deny by marginal costing. It can be stated in two ways: - Sales Revenue – Variable Cost
- Fixed Cost + Profit The condition generating higher contribution is treated as a profitable condition.
The entire given can be used to calculate average profit except: w) marginal profit minus marginal cost. x) total profit divided by quantity. y) average revenue minus average total cost. z) price minus average total cost.
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When, for a specified output level, an absolute or perfectly competitive firm's price is less in that case its average variable cost, so the firm: w) is earning a profit. x) must shut down. y) must increase output. z) must increase price. Q : Backward bending of individual labor The labor supply curve facing a firm or industry is all the time upward sloping still when individual labor supply curves are backward bending since: (w) at higher wages everyone will supply more hours of work. (x) firms never pay wag
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answer written below is correct for the question detail exception of demand curve ?
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