Shrashti has just finished her diploma in business administration recently. She wants to join her father’s business and told the same to her father. Knowing that her father gave some information to her and asked to make a presentation on the information, if she presents it well then he will get her inducted into his business. The information is as follows:

Her father has spinning yarn in Udupi in which there are 20000 spindles each which produce 1500 metres of satin cloth every year. His father sells the cloth to garments manufacturers at Rs. 20 per metre. Also, he exports 30% of his total production of to makers of imported clothes and for that he charges a 200% more than the domestic price. Her father also has a garment factory in Laturi where he manufactures woolen clothes. He sells the woolen clothes at an average price of Rs. 200 per piece. He procures wool for making these clothes at a price of Rs. 90 per pound. To make one piece of woolen cloth 1.5 pounds of wool is used. In a year he procures around 15 lakhs pounds of wool. He also has a shop in Waluj for selling ready made jeans. He sells the jeans at price of Rs. 350. For each jean he has to use 200gms of raw material. A kilogram of raw material cost Rs. 1000. Each jean has an additional tailoring cost of Rs. 100. Also the raw material for jeans gets wasted 20% while tailoring.

Based on information Shrashti created a presentation and presented it in front of the top management of his father’s firm. The management asked her few questions based on the presentation. Help Shrashti to answer the following question.

If the supplier of wool decides to increase the price of wool supplied to Rs. 120 per pound, then by what percentage his father’s current profit/loss of the woolen garments business will decrease/increase (approx.)?

Option 1 -

70% decrease in profit

Option 2 -

30% increase in loss

Option 3 -

72% decrease in profit

Option 4 -

Cannot be determined

0 1 View | Posted 2 months ago
Asked by Shiksha User

  • 1 Answer

  • P

    Answered by

    Payal Gupta | Contributor-Level 10

    2 months ago
    Correct Option - 1


    Detailed Solution:

    Profit earned at present = Rs. 65,000,000

    New cost of wool = Rs. 120 per pound. So the total cost is now Rs. 180,000,000. As the revenue is same hence the new profit will be Rs. 20,000,000. So there is decrease of Rs. 45,000,000 which is a 70% decrease approx.

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