Sales value giving a profit is calculated as

Sales value giving a profit is calculated as

• A. (Fixed costs + required profit) / PV ratio
• B. Fixed costs × PV ratio
• C. Total revenue × PV ratio
• D. (Fixed costs - required profit) / PV ratio

Answer: (A)

PV ratio shows how much of each sales dollar becomes contribution after variable costs. If Sales value is S, contribution = PV ratio × S. Profit = contribution − fixed costs. To achieve a required profit, you need contribution to cover both fixed costs and that profit, so PV ratio × S = fixed costs + required profit. Solve for S: S = (fixed costs + required profit) / PV ratio. This is exactly the first option. The other expressions don’t solve for the sales value you need: multiplying fixed costs by PV ratio isn’t the required sales; using total revenue times PV ratio gives total contribution, not the sales needed to reach a target profit; and subtracting the required profit from fixed costs before dividing by PV ratio misplaces the relationship.

PV ratio shows how much of each sales dollar becomes contribution after variable costs. If Sales value is S, contribution = PV ratio × S. Profit = contribution − fixed costs. To achieve a required profit, you need contribution to cover both fixed costs and that profit, so PV ratio × S = fixed costs + required profit. Solve for S: S = (fixed costs + required profit) / PV ratio. This is exactly the first option.

The other expressions don’t solve for the sales value you need: multiplying fixed costs by PV ratio isn’t the required sales; using total revenue times PV ratio gives total contribution, not the sales needed to reach a target profit; and subtracting the required profit from fixed costs before dividing by PV ratio misplaces the relationship.