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A small and medium enterprise imports two components $A$ and $B$ from Taiwan and China respectively and assembles them with other components to form a toy. Component $A$ contributes to $10%$ of production cost. Component $B$ contributes to $20%$ of the production cost. Usually, the company sells this toy at 20% above the production cost. Due to increase in the raw material and labour cost in both the countries, Component $A$ became $20%$ costlier and component $B$ became $40%$ costlier. Owing to these reasons the company increased its selling price by $15%$. Considering that cost of other components does not change, what will be the profit percentage, if the toy is sold at the new price?









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Option(B) is correct

Let the price of the products be 100.

Then, the price of the components $A$ and $B$ will be 10 and 20 respectively.

As the profit is $20\%$, the selling price = 120.

Due to increase in the price of raw material, the new costs of components $A$ and $B$ will be 12 and 28 respectively.

The new selling price $=115\%$ of 120=138

As, there is no change in the price of the other components,

New cost of the products = 110.

Thus, new profit

\(=\dfrac{28}{110}\times 100\)


(1) Comment(s)


why new cost of the products is 110?..plz explain