Abdul has 8 factories, with different capacities, producing boutique kurtas

Study the paragraph below and answer the questions that follow:

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

1. Which of the following options is in decreasing order of raw materials cost?

  1. Factory 3, Factory 4, Factory 7, Factory 5
  2. Factory 4, Factory 3, Factory 2, Factory 5
  3. Factory 6, Factory 3, Factory 5, Factory 7
  4. Factory 6, Factory 8, Factory 7, Factory 2
  5. Factory 8, Factory 3, Factory 2, Factory 4

2. Which of the factories listed in the options below has the lowest sales margin (sales margin = profit per kurta divided by selling price per kurta)?

  1. Factory 2
  2. Factory 4
  3. Factory 5
  4. Factory 6
  5. Factory 7

3. Abdul has received an order for 2,000 kurtas from a big retail chain. They will collect the finished pre-packaged kurtas directly from the factories, saving him the selling cost. To deliver this order, he can use multiple factories for production. Which of the following options will ensure maximum profit from this order?

  1. Factory 1
  2. Factories 2 and 3
  3. Factories 4 and 6
  4. Factories 3, 6 and 4
  5. Factory 1 or Factory 7 or Factory 8

4. 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?

  1. Factory 2
  2. Factory 3
  3. Factory 4
  4. Factory 5
  5. Factory 6

Answers

  1. A
  2. E
  3. D
  4. B

Explanation for Question 1

Profit = selling price - raw materials cost - selling cost - labour cost

A worker takes 2 hours to produce a kurta. In the table, labour cost is given per hour.

Raw materials cost = selling price - - profit selling cost - (2 × labour cost)

For factory 3, Raw material cost = 5800 - 60 - 900 - (2 × 550) = 3740.

Similarly for factory 4, 7, and 5, the raw material cost are respectively 3732, 3615 and 3525.

Hence, the decreasing order is 3, 4, 7, 5.

Explanation for Question 2

Sales margin for factory 2 is 8/53

For factory 4 is 8/55

For factory 5 is 6/54

For factory 6 is 875/6000

For factory 7 is 5/49

The lowest value is for factory 7.

Explanation for Question 3

In this case, selling cost is added to get revised profit per kurta. 

Factory 1 = 835

Factory 2 = 845

Factory 3 = 960

Factory 4 = 868

Factory 6 = 940

Factory 7 = 588

Factory 8 = 670

The profit is maximum for factories 3, 6 and 4.

Explanation for Question 4

In this case, revised profit equals given profit added by labour cost for half-hour.

Factory 2 = 800 + 400/2 = 1000

Factory 3 = 900 + 556/2 = 1175

Factory 4 = 800 + 450/2 = 1025

Factory 5 = 600 + 600/2 = 900

Factory 6 = 875 + 400/2 = 1075

The highest profit is for factory 3.