XAT 2017 — QA & DI Question 22
Answer the next 4 questions based on the following information:
Abdul has 8 factories, with different capacities, producing boutique kurtas. In the production process, he incurs raw material cost, selling cost (for packaging and transportation) and labour cost. These costs per kurta vary across factories. In all these factories, a worker takes 2 hours to produce a kurta. Profit per kurta is calculated by deducting raw material cost, selling cost and labour cost from the selling price (Profit = selling price - raw materials cost - selling cost - labour cost). Any other cost can be ignored.
Exhibit: Business Details of Abdul’s 8 Factories
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Abdul has introduced a new technology in all his factories. As a result, a worker needs just 1.5 hours to produce a kurta. If raw materials cost and selling cost remain the same, which of the factories listed in the options below will yield the highest profit per kurta?
Answer & solution
- A
Factory 2
Factory 3
- C
Factory 4
- D
Factory 5
- E
Factory 6
Here, a worker takes 1.5 hours to produce a kurta.
Hence for factory 2 new labour cost would be 1.5 × 400 = 600 instead of 2 × 400 = 800
⇒ Profit of factory 2 will increase by 0.5 × 400 = 200.
New profit for factory 2 = 500 + 200 = 700.
Similarly, we can make the following table for new profit of each of the companies mentioned in the options.
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Thus, the maximum profit is obtained from Factory 3.
Hence, option (b).