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CAT 1998 — QA Question 26

Profit & LossEasy
Passage / Data

Answer the next 2 questions based on the following information.

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%.

What is the maximum current gain possible?

Answer & solution

  • 10%

  • B

    12.5%

  • C

    0%

  • D

    7.5%

Solution

Let CP = 100
Current gain = 20
⇒ SP = 120
CP = Cost of A + Cost of B + other
      =      30%    +    50%     +   20%

Since cost of German mark (A) increase by 30%
New cost of A = 30 + 30% of 30 = 39
Similarly
New cost of B = 50 + 22% of 50 = 61
New CP = 39 + 61 + 20 = 120
New SP = 120 + 10% of 120 = 132
Maximum profit = 1220=10%

CAT 1998 QA Q26: What is the maximum current gain possible? — Solution | TheCATExam