Q85 – 86. : A company purchases components A and B from Germany and USA, respectively. A and B form 30% and 50% of the total production cost. Current gain is 20%. Due to change in the international scenario, cost of the German Mark increased by 30% and that of USA Dollar increased by 22%. Due to market conditions the selling price cannot be increased beyond 10%. Then,
85. What is the maximum current gain possible?
(a) 10%
(b) 12.5%
(c) 0%
(d) 7.5%
86. If the USA Dollar becomes cheap by 12% over its original cost and the cost of German Mark increased by 20%. The selling price is not altered. What will be the gain?
(a) 10%
(b) 20%
(c) 15%
(d) 7.5%
Answers:
| 85 | (a) |
| 86 | (b) |
85. Let us assume that the total production cost is Rs.100. So component A’s share in this would be Rs.30 & that of B would be Rs.50. Thus we can see that there is a component of (100 – 30 – 50) = Rs.20, that constitutes other expenses. The product is currently sold at 20% profit = Rs.120. Now due to change in international scenario, cost of component A increases by 30% to Rs.39 and the cost of component B by 22% to Rs.61. Hence the total cost of production of the product = (39 + 61 + 20) = Rs.120 (Note that no change has been indicated in other expenses). It is further said that selling price cannot be increased beyond 10%. Hence the maximum selling price can be Rs.132. This means that the maximum gain can only be (12/120) = 10%.
86. The cost of component A will now be (1.2 x 30) = Rs.36 and that of B will be (0.88 x 50) = Rs.44. So total cost of production = (36 + 44 + 20) = Rs.100. Since the selling price is not altered i.e. Rs.120, the gain will be the same as the original one i.e.20%.
0 Comments