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A Techno company has 14 machines of equal efficiency in its factory. The annual manufacturing costs are Rs 42,000 and establishment charges are Rs 12,000. The annual output of the company is Rs 70,000. The annual output and manufacturing costs are directly proportional to the number of machines. The shareholders get $12.5%$ profit, which is directly proportional to the annual output of the company. If $7.14%$ machines remain closed throughout the year, then the percentage decrease in the amount of profit of the shareholders would be:








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Option(B) is correct

Original profit 

= $70,000−42,000−12,000=16,000$

If $7.14\%$ of 14 i.e. one of the machines closed throughout the year, then change in profit will be:

\(=\dfrac{13}{14}\times [70,000-42,000]\)


Thus, decrease in the profit $\%$

\(=\dfrac{2000}{16000}\times 100\)


(5) Comment(s)


Explanation - Given,

Profit for company=annual output - (maintenance cost+establishment charges)

Profit for share holders = 12.5% of profit for company

Now, actually the company owns 14 machines but for a given year all may or may not work and it is given that the annual output(AO) and maintenance cost(MC) depends on the number of machines that are working. Assuming all 14 machines(M) are working it is given

AO = Rs 42000

MC = Rs 70000

M = 14

Profit for company = $70000-(42000+12000) = 16000$

Profit for share holders = $0.125*16000=2000$

It is given that for a particular year 7.14% of 14 machines are not working i.e, 1 out of 14 machines is not working.

So, for 13 working machines AO = 65000, MC = 39000

Therefore, profit for the company can be calculated -

$Profit for company = 65000-(39000+12000)=14000$

Profit for share holders = $0.125*14000=1750$

Change in profit for share holders = $(2000-1750/2000)=0.125 or $12.5%


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