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CAT 2003 Slot 2 — DILR Question 42

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Passage / Data

Answer the following question based on the information given below.

The following is the Wholesale Price Index (WPI) of a select list of items with the base year of 1993-94. In other words, all the item prices are made 100 in that year (1993-94). Price in all other years for an item are measured with respect to its price in the base year. For instance, the price of cement went up by 1% in 1994-95 as compared to 1993-94. Similarly, the price of power went up by 3% in 1996–97 as compared to 1993-94.

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Steel manufacturing requires the use of iron ore, power and manpower. The cost of iron ore has followed the All Item index. During 1993-94 power accounted for 30% of the selling price of steel, iron ore for 25%, and wages for 10% of the selling price of steel. Assuming the cost and price data for cement as given in the previous question, the operating profit (% of selling price) of an average steel manufacture in 2002-03

Answer & solution

Correct answer: is less than that of a cement manufacturer

  • A

    is more than that of a cement manufacturer

  • is less than that of a cement manufacturer

  • C

    is the same as that of a cement manufacturer

  • D

    cannot be determined

Solution

WPI of steel in 2002-03 = 105.5

∴ Operating Profit per bag of steel in 2002-03

=105.5-69.43105.5 × 100 = 34.2%

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∴ Profit percentage of a steel manufacturer in 2002-03 is less than the profit percentage of a cement manufacturer in 2002-03.

Hence, option (b).

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CAT 2003 Slot 2 DILR Q42: Steel manufacturing requires the use of iron ore, power and manpower. The cost of iron ore has followed the Al — Solution | TheCATExam