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Q.

A textile manufacturing firm employees 50 looms. It makes fabrics for a branded company. The aggregate sales value of the output of the 50 looms is Rs 5,00,000 and the monthly manufacturing expenses is Rs 1,50,000. Assume that each loom contributes equally to the sales and manufacturing expenses are evenly spread over the number of looms. Monthly establishment charges are Rs 75000. If one loom breaks down and remains idle for one month, the decrease in profit is:

 A.

Rs 13,000

 B.

Rs 10,000

 C.

Rs 7,000

 D.

Rs 5,500

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Solution:
Option(C) is correct

Profit = $5,00,000−(1,50,000+75,000)$ =Rs. $2,75,000$

Since, such loom contributes equally to sales and manufacturing expenses.

But the monthly charges are fixed at Rs 75,000.

If one loan breaks down sales and expenses will decrease.

New profit

\(=500000\times \dfrac{49}{50}-150000\times \dfrac{49}{50}-75000\)

\(\Rightarrow \text{Rs } 2,68,000\)

Decrease in profit 

$=2,75,000−2,68,000$

$=$ Rs. 7,000


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