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A company proposes to introduce a new product in the market. The company wants to maintain P/V Ratio at 25%. If variable cost of the product is Rs. 300, what will be the selling price?

This question was previously asked in
UGC Paper 2: Commerce 22nd Dec 2018
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  1. Rs. 100
  2. Rs 200
  3. Rs. 300
  4. Rs. 400

Answer (Detailed Solution Below)

Option 4 : Rs. 400
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Detailed Solution

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PV Ratio = (Sales - Variable Cost) / Sales

0.25 = (Sales - 300) / Sales

0.25 Sales = Sales - 300

Sales - 0.25 Sales = 300

0.75 Sales = 300

Sales = Rs. 400. 

Therefore, if a company proposes to introduce a new product in the market. The company wants to maintain P/V Ratio at 25%. If the variable cost of the product is Rs. 300, the selling price will be Rs. 400.

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