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Profit Volume Ratio (PV) |
| The contribution margin ratio (CMR) i.e. PV ratio is the percentage by which the selling price (or revenue) per unit exceeds the variable cost per unit, or contribution margin as a percentage of revenue. |
| Example |
| For Hero1, we could use the forecast information about volume (12,000 bikes) to determine the contribution margin ratio. |
- Total revenue =
 800 * 12,000
= 96,00,000
- Total variable cost = 300* 12,000
= 36,00,000
- Total contribution margin = 9,600,000 - 3,600,000
= 6,000,000
- Contribution margin ratio = 6,000,000 / 9,600,000
= 0.625
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