Iift 2010 Question 3
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IIFT 2010
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 * 13/40) = Rs. 39000 [As it is directly proportional to the number of functional machines]
Output of 13 machines = Rs. (70000 * 13/40) = Rs. 65000 [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 % = 250/3000 *100% = 12.5%
Hence, option B is the correct answer.