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A pen company produces very fine quality of writing pens. Company knows that on average 10% of the produced pens are always defective so are rejected before packing. Company promises to deliver 7200 pens to its wholesaler at Rs. 10 each. It estimates the overall profit on all the manufactured pens to be 25%. What is the manufactured cost of each pen?
Answer & Solution
Correct Answer:
Option
B
The company is able to deliver 90% of the manufactured pens. Means to produce 7200 pens they must have to produce 8000 pens as 10% are defectives.
So, let K be the manufacturing price of each pen.
Total income (including 25% profit) = 8000 × K × 1.25
This same income is obtained by selling 90% manufactured pens at Rs. 10 which is equal to 7200 × 10
Thus,
8000 × K × 1.25 = 7200 × 10
K = Rs. 7.2 [90% of 8000 = 7200]
So, let K be the manufacturing price of each pen.
Total income (including 25% profit) = 8000 × K × 1.25
This same income is obtained by selling 90% manufactured pens at Rs. 10 which is equal to 7200 × 10
Thus,
8000 × K × 1.25 = 7200 × 10
K = Rs. 7.2 [90% of 8000 = 7200]
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Login⇒ CP = 72000/10000
⇒ CP = 7.2