Manufacturing cost (MC) of 14 machines = Rs. 42000
Output of 14 machines = Rs. 70000
Establishment cost (EC) = Rs. 12000
Profit = Rs.(70000 - 42000 - 12000) = Rs. 16000
Shareholder's profit = 12.5% of Rs. 16000 = Rs. 2000
It is given that 7.14% of the machines were non functional which means only 13 machines were functional.
MC of 13 machines
=Rs.(42000×)=Rs.39000 [As it is directly proportional to the number of functional machines]
Output of 13 machines
=Rs(70000×)=rs.650000 [As it is directly proportional to the number of functional machines]
EC of 13 machines = Rs. 12000 [As it does not depend on the number of functional machines]
Profit = Rs.(65000 - 39000 - 12000) = Rs. 14000
Shareholder's profit = 12.5% of Rs. 14000 = Rs. 1750
Reduction in Shareholder's profit = Rs.(2000 - 1750) = Rs. 250
Reduction %
=×100%=12.5%Hence, option B is the correct answer.