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Indian Institute of Foreign Trade 2010 Solved Paper

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Question : 28 of 135

Marks: +1, -0

A small and medium enterprise imports two components A and B from Taiwan and China respectively and assembles them with other components to form a toy. Component A contributes to 10% of production cost. Component B contributes to 20% of the production cost. Usually the company sells this toy at 20% above the production cost. Due to increase in the raw material and labour cost in both the countries, component A became 20% costlier and component B became 40% costlier. Owing to these reasons the company increased its selling price by 15%. Considering that cost of other components does not change, what will be the profit percentage, if the toy is sold at the new price?

15.5%
25.5%
35.5%
40%

Solution:

Let the production cost be Rs. 100

The, Selling Price = Rs. 120

Price of component A = Rs. 10

Price of component B = Rs. 20

Price of other components

=\mathrm{Rs.}(100-10-20)=\mathrm{Rs.}70

After increase in prices,

Price of component A = Rs. 12

Price of component B = Rs. 28

Price of other components = Rs. 70

Total Cost of production

=\mathrm{Rs.}(12+28+70)=\mathrm{Rs.}110

Selling price

=\mathrm{Rs.}(1.15\times 120)=\mathrm{Rs.}138

Profit = Rs. 28

Profit %

=25.45\%

Hence, option B is the correct answer.

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