Economics · Cost Accounting
The Profit Volume (P/V) Ratio is a key metric in Cost-Volume-Profit (CVP) analysis. Which statement most accurately describes the significance of a high P/V Ratio?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1A high P/V Ratio suggests that the product is highly sensitive to changes in sales price, but less sensitive to changes in sales volume.
- 2A high P/V Ratio guarantees a large Margin of Safety (MOS), regardless of sales volume.
- 3A high P/V Ratio signifies a low level of fixed expenses relative to variable expenses.
- 4A high P/V Ratio indicates that the product has a low Breakeven Point and a high Contribution per unit.✓
Correct answer
A high P/V Ratio indicates that the product has a low Breakeven Point and a high Contribution per unit.
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