If the P/V Ratio of a product is 30% and selling price is Rs. 25 per unit, the marginal cost of the product would be .a.Rs.20 .b.Rs. 15 .c.Rs.18.75 .d.Rs.16 .
Question
If the P/V Ratio of a product is 30% and selling price is Rs. 25 per unit, the marginal cost of the product would be:
- a. Rs.20
- b. Rs. 15
- c. Rs.18.75
- d. Rs.16
Solution
The P/V ratio, also known as the contribution margin ratio, is calculated as (Selling Price - Variable Cost) / Selling Price.
Given that the P/V ratio is 30% and the selling price is Rs. 25, we can set up the following equation to solve for the variable cost, which is the same as the marginal cost:
0.30 = (25 - Variable Cost) / 25
Solving for Variable Cost, we get:
Variable Cost = 25 - (0.30 * 25) Variable Cost = 25 - 7.5 Variable Cost = Rs. 17.5
However, this is not an option in the choices provided. It seems there may be a mistake in the question or the provided options.
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