Instructions

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.


Question 68

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?

Solution

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

Hence, raw materials cost = selling price - profit - selling cost - labor cost 

Raw materials cost per Kurta 

for factory 2,    5300-800-45-400*2                      ....(1)

After technology is introduced, a worker takes 1.5 hour to produce a kurta.

Labor cost per Kurta = 1.5 * (Labor cost/ hour)

New Profit          = selling price - raw materials cost - selling cost - new labor cost 

Profit per kurta 

for factory 2       = 5300-(5300-800-45-400*2)-45-400*1.5 = 800 + 400*0.5   =  Original Profit per kurta + 0.5*Labour cost per hour

                                                                                     = 1000

Similarly,

for factory 3,    900+550*0.5 = 1175

for factory 4,    800+450*0.5 = 1025

for factory 5,    600+600*0.5 = 900

for factory 6,    875+400*0.5 = 1075

Factory 3 will yield highest profit.


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