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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.
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)?
Sales margin = Profit per kurta/ selling price per kurta
for factory 2, sales margin = 800/5300 = 0.151
for factory 4, sales margin =Â 800/5500 = 0.145
for factory 5, sales margin =Â 600/5400 = 0.111
for factory 6, sales margin =Â 875/6000 = 0.146
for factory 7, sales margin =Â 500/4900 = 0.102
Factory 7 has lowest sales margin.
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