Match the following. List-I List-II a. Marginal cost 1. . . . . . . . . = Contribution ÷ Sales b. P/V ratio 2. Contribution = Selling price – . . . . . . . . c. Profit 3. . . . . . . . . = Sales (1 – P/V ratio) d. Variable costs 4. Margin of safety = . . . . . . . . ÷ P/V ratio

The correct answer is: C. a-2, b-1, c-4, d-3

Here is a brief explanation of each option:

• Marginal cost is the change in total cost that arises when the quantity produced changes by one unit. It is calculated by dividing the change in total cost by the change in quantity produced.
• P/V ratio is the ratio of contribution margin to sales. It is calculated by dividing contribution margin by sales.
• Contribution is the amount of revenue that remains after variable costs have been deducted. It is calculated by subtracting variable costs from sales.
• Profit is the amount of revenue that remains after all costs have been deducted. It is calculated by subtracting total costs from sales.

The following is the solution to the matching exercise:

List-I | List-II
——- | ——–
a. Marginal cost | 2. Contribution = Selling price – Variable costs
b. P/V ratio | 1. Margin of safety = Sales ÷ P/V ratio
c. Profit | 3. Profit = Sales (1 – P/V ratio)
d. Variable costs | 4. Contribution margin = Sales – Variable costs