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    Question

    ____________ = (sales value – variable cost)/ Sales

    value
    A P/V ratio Correct Answer Incorrect Answer
    B Contribution Correct Answer Incorrect Answer
    C Break-even point Correct Answer Incorrect Answer
    D Equilibrium point Correct Answer Incorrect Answer

    Solution

    The price volume ratio (contribution margin ratio) represents the percentage of sales revenue that contributes to covering fixed costs and generating profits after deducting variable costs. It indicates the proportion of each sales dollar that is available to contribute to the company's profitability. This ratio is a valuable measure for businesses to understand their cost structure and how changes in sales volume can impact their profits.

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