An improvement in this ratio can be achieved by:
The selling price increase; but the risk that the volume of sales might be affected in involved in it. By purchasing the latest machinery, a reduction in the variable cost per unit can be achieved, thereby cutting the hours which may be required to complete each operation. However, higher fixed costs such as depreciation & insurance might offset this reduction.
By concentrating on those products by which highest contribution can be achieved.
For doing business analysis, in the hands of management, the P/V ratio is an invaluable tool.
