Explain the significance of Profit-Volume ratio, Margin of Safety and Angle of Incidence?

Profit-volume ratio indicates the relationship between contribution and sales and is usually expressed in percentage.

The ratio shows the amount of contribution per rupee of sales. Since, in the short-term, fixed cost does not change, the profit-volume ratio also measures the rate of change of profit due to change in the volume of sales.

It is influenced by sales and variable or marginal cost. If the sale price increases without a corresponding increase in marginal cost, the contribution increases—and the profit-volume ratio improves. Similarly, if the marginal cost is reduced with sale price remaining same— profit-volume ratio improves.

The advantages of profit-volume ratio are that it can be used to measure profitability of each product, or group of them, separately so that the necessity for continuance of such production can be __________ ________ __________ _____ _________ _________.
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