Q:
If the labour cost 20% of the cost of production and raw material cost 10% of the cost of production and the price on which article is sold is 20% above the cost of production. If the price of labour is increased by 40% and the price of raw material increased by 20% and rest other expenditure of cost remain constant. The industry thus decide to increase the selling price by 10%. Find the new profit percent ?
Answer & Explanation
Answer: B) 20%
Explanation: Let the Cost of Production of the article = 100
Then, Labour Cost = 20
Raw Material = 10
Other Expenditure = 100 - 10 – 20 = 70
Selling Price of the article = 120
After increasing Labour and Raw material cost by 40% & 20% respectively,
New Labour cost = 28
New Raw material cost = 12
New Cost of Production = 70 + 28 + 12 = 110
Then, New SP = 110% of 120 = 120 x 110/100 = 132
=> New Gain = 132 - 110 = 22
=> New Profit % = 22 x 100/110 = 20%
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