For a company,P/V ratio 60%Variable cost $20.00 Calculate the selling price a$100 b$50 c$75 d$25
Question
For a company, P/V ratio 60% Variable cost $20.00
Calculate the selling price
- a) $100
- b) $50
- c) $75
- d) $25
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 60% and the variable cost is $20.00, we can set up the following equation to solve for the selling price:
0.60 = (Selling Price - $20.00) / Selling Price
To solve for the Selling Price, we can rearrange the equation:
Selling Price = $20.00 / (1 - 0.60)
Selling Price = $20.00 / 0.40
Selling Price = $50.00
So, the correct answer is b) $50.
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