Multiple choice

Directions: Choose the correct option for the given question.

A decrease in the variable cost per unit _____ the P/V ratio.

  1. increases

  2. decreases

  3. do not affect

  4. either (1) or (2)

  5. none of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The P/V ratio is calculated as (Contribution / Sales). Since Contribution = Sales - Variable Cost, a decrease in variable cost increases the contribution, thereby increasing the P/V ratio.

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