Question

If the labour cost $20\%$ of the cost of production and raw material cost $10\%$ of the cost of production and the price on which article is sold is $20\%$ above the cost of production. If the price of labour is increased by $40\%$ and the price of raw material increased by $20\%$ and rest other expenditure of cost remain constant. The industry thus decide to increase the selling price by $10\%$. Find the new profit percent ?

Answer 1

Let the Cost of Production of the article $=100$

Then, Labour Cost $=20$

Raw Material $=10$

Other Expenditure $=100-10-20=70$

Selling Price of the article $=120$

After increasing Labour and Raw material cost by $40\%$ and $20\%$ respectively,

New Labour cost $=28$

New Raw material cost $=12$

New Cost of Production $=70+28+12=110$

Then, New SP $=110\%$ of $120=120\times \frac{110}{100}=132$

$\Rightarrow$ New Gain $=132-110=22$

$\Rightarrow$ New Profit $\%=22\times \frac{100}{110}=20\%$