An Indian company purchases components X and Y from UK and Germany, respectively. X and Y form 40% and 30% of the total production cost. Current gain is 25%. Due to change in the international exchange rate scenario, the cost of the German mark increased by 50% and that of UK pound increased by 25%. Due to tough competitive market conditions, the selling price cannot be increased beyond 10%. What is the maximum current gain possible? (a) 10% (b) 12.5% (c) 0% (d) 7.5%
Answers
Answer:
a)10%
Step-by-step explanation:
let intial CP be 100
Current Gains = 25% = 25% of 100 = 25
Therefore, SP = 100+25= 125
now,
Total production cost of 100 will contain 40% of X, 30% of Y and rest will be other cost
therefore,
TOTAL PRODN. COST = 40+30+30 = 100
NEW increased prodn. cost(CP) = 50+ 45+ 30= 125
given, SP can be increased only by 10% ,
NEW SP = 125+ (10% of 125)=137.5
new gain = (SP - CP)/CP
= (137.5 -125)/125 = 10%
The correct answer is option (a) 10%
let intial CP be 100
Current Gains = 25% = 25% of 100 = 25
Therefore, SP = 100+25= 125
now,
Total production cost of 100 will contain 40% of X, 30% of Y and rest will be other cost
therefore,
TOTAL PRODN. COST = 40+30+30 = 100
NEW increased prodn. cost(CP) = 50+ 45+ 30= 125
given, SP can be increased only by 10% ,
NEW SP = 125+ (10% of 125)=137.5
new gain = (SP - CP)/CP
= (137.5 -125)/125 = 10%
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