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Application of the P/V Ratio

1. Determination of BEP = FC + P/V ratio
2. Determination of profile at given/budgeted sales volume = (Actual sales – BE sales) x P/V ratio.
3. Determination of sales volume to earn budgeted profit = (FC + DP) + P/V ratio.
4. Determination of change in sales volume to maintain the current level of profile if there is (a) a change in sales price, (b) change in variable cost = (FC + DP) + Revised P/V ratio.
5. Determination of the percentage of net profit with the help of margin of safety ratio = (P/V ratio x MS ratio).

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