Question

The cost of manufacturing a product including labor, material and overhead are in the ratio 5 : 7 : 3. If the profits are calculated as 20% on costs, what is the ratio of material costs to profit?

• A. $5:2$
• B. $10:3$
• C. $11:9$
• D. $7:3$

Answer 1

The correct option is D $7:3$

Since we are provided with the ratio, we can now take:

Cost of labor= 5x

Cost of material= 7x

Cost of overhead= 3x

Profit= 20% of total cost

=20% of (5x+7x+3x)

= $\frac{20}{100}\times 15x$

$=3x$

So, ratio of material costs to profit $=7x:3x=7:3$