PVR

System

Hello

Trying to do some a question but dont have my formula with me. Can someone remind me what PVR is?

System

Re:PVR

The Profit Volume (or Contribution Sales) Ratio simply expresses the amount of contribution in relation to selling price:

Contribution (£) = Profit Volume ratio
Selling Price (£)

If we know the fixed costs, we can use the PV ratio to calculate the sales revenue needed to break-even:

Fixed Costs (£) = Break-Even Sales Revenue
PV ratio

EXAMPLE
A company makes and sells a product. The variable costs (direct materials, direct labour) for this product = £15, and the selling price is £30. The fixed costs for this product are £10,000 per month. Calculate the Profit Volume ratio, and the sales revenue the company must achieve per month in order to break-even.

Selling Price (£30) - Variable Costs (£15) = Contribution (£15)

PV ratio =
£15 = 0.5, or 50 %
£30

Break-even sales revenue =
£10,000 = £20,000 per month
0.5

Hope this helps

System

Re:PVR

Thank you