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QUESTION: 1

Mr Hoola Boola is facing a decision problem. He has excellent training products but is not sure about the demand for his products. He wants to set up a training centre to provide training programmes of Sr Executive, Jr executive and non-cxccutivc level. His financial advisor Mr Balmas told him that if he wants to set up a non-executive level training centre, the total cost would be on two counts—the first would be a fixed cost which is Rs 2 lakh per annum. Besides, it would also entail a variable cost of training per candidate. This would be Rs 1,000 per candidate trained. He further estimated that if a training centre is set up for conducting Jr executive and non-executive level training programmes, the total fixed cost would be Rs 3.2 lakh per annum and the cost of training per candidate will be Rs 750. Mr Balmas motivates Mr Hoola to set up a combined training centre for Sr executive, Jr executive and non-executive, the fixed cost of which is Rs 5 lakh per annum and the cost o f providing training per candidate is Rs 500.

You as a hotshot IIM, Ahmcdabad MBA, have some decision making abilities. Please help Mr Hoola Boola by answering the following questions:

Q.

What would be the volume that Mr Hoola should train where he would be indifferent between setting up a non-executive level and non-executive and Jr executive level training centre?

Solution:

Let x be the volume. So the cost of training x candidates in both o f these should be the same for indifference between the two options i.e., 2 lakh + 1000 x = 3.2 lakh + 750 x ⇒ 250.x ■ 1.2 lakh ⇒x =120,000/250 = 480

QUESTION: 2

Mr Hoola Boola is facing a decision problem. He has excellent training products but is not sure about the demand for his products. He wants to set up a training centre to provide training programmes of Sr Executive, Jr executive and non-cxccutivc level. His financial advisor Mr Balmas told him that if he wants to set up a non-executive level training centre, the total cost would be on two counts—the first would be a fixed cost which is Rs 2 lakh per annum. Besides, it would also entail a variable cost of training per candidate. This would be Rs 1,000 per candidate trained. He further estimated that if a training centre is set up for conducting Jr executive and non-executive level training programmes, the total fixed cost would be Rs 3.2 lakh per annum and the cost of training per candidate will be Rs 750. Mr Balmas motivates Mr Hoola to set up a combined training centre for Sr executive, Jr executive and non-executive, the fixed cost of which is Rs 5 lakh per annum and the cost o f providing training per candidate is Rs 500.

You as a hotshot IIM, Ahmcdabad MBA, have some decision making abilities. Please help Mr Hoola Boola by answering the following questions:

Q.

What would be the volume that Mr Hoola should train where he could be indifferent between setting up a training centre for non-executive and for all three categories?

Solution:

Let x be the volume. 2 lakh + 1000 x = 5 lakh + 500 x = 600.

QUESTION: 3

Mr Hoola Boola is facing a decision problem. He has excellent training products but is not sure about the demand for his products. He wants to set up a training centre to provide training programmes of Sr Executive, Jr executive and non-cxccutivc level. His financial advisor Mr Balmas told him that if he wants to set up a non-executive level training centre, the total cost would be on two counts—the first would be a fixed cost which is Rs 2 lakh per annum. Besides, it would also entail a variable cost of training per candidate. This would be Rs 1,000 per candidate trained. He further estimated that if a training centre is set up for conducting Jr executive and non-executive level training programmes, the total fixed cost would be Rs 3.2 lakh per annum and the cost of training per candidate will be Rs 750. Mr Balmas motivates Mr Hoola to set up a combined training centre for Sr executive, Jr executive and non-executive, the fixed cost of which is Rs 5 lakh per annum and the cost o f providing training per candidate is Rs 500.

You as a hotshot IIM, Ahmcdabad MBA, have some decision making abilities. Please help Mr Hoola Boola by answering the following questions:

Q. what is the profit percentage in the first year of operation?

Solution:

Total cost = 11 lakh proft = 4 lakh ∴profit % = (4/11) X 100 = 36.36%

QUESTION: 4

Not surprisingly the growth of the hotel industry is driven by the increase in the number of people using hotels and the increase in per person use of the hotel. In 2004, it is expected that there will be 200 million hotel users in India, or about 20 p er cent o f the population will generate Rs 50 billion in hotel revenues. Industry revenues should expand from Rs 50 billion to Rs 150 billion by 2008, w hile the number of users should grow to over 560 million or to about half the population of India in the same period.

Q.

What will be the simple average growth rate of population of India in the given period 2004-2008?

Solution:

2004 population = 1000 million Population in 2008 o r after 4 years = 560 x 2 = 1120 million /. Growth rate = (120 x 100)/(1000 x 4) = (12/4)% = 3 % per annum simple growth rate.

QUESTION: 5

Not surprisingly the growth of the hotel industry is driven by the increase in the number of people using hotels and the increase in per person use of the hotel. In 2004, it is expected that there will be 200 million hotel users in India, or about 20 p er cent o f the population will generate Rs 50 billion in hotel revenues. Industry revenues should expand from Rs 50 billion to Rs 150 billion by 2008, w hile the number of users should grow to over 560 million or to about half the population of India in the same period.

Q.

What will be the percentage growth of the revenues o f the hotel industry in the given period?

Solution:

QUESTION: 6

Bihar and Orissa are the most deprived states of India. While they contain one-fifth of India’s population, they have almost one-third of India’s illiterates. In 1998, only a small fraction of Orissa and Bihar’s population was literate versus 85 per cent o f K erala’s population. More than two-thirds of the births are not attended by any medical facility, 1/10th of the infants bom in Orissa and Bihar die in infancy and an equal number before reaching the age o f five. Alm ost 90 per cent o f the under five deaths are due to malnutrition.

From amongst the lucky kids who have survived for the first five years ,1/3rd o f them work as child labourers and only half of the remaining are sent to school. Of those who attend classes, only 40 per cent are able to reach Std V. In India, 30 per cent of the children under 16 work as labourers. Orissa and Bihar contain 1/3rd o f the child labourer* in India. India has the largest population of chi Id labourers, which is 1/15th o f its total population.

In Orissa and Bihar, out o f 100 children enrolled in school, 32 are girls. And out of 100 who attend Std X, only 10 are girls. Only 38 out of 100 Indian women are literate versus 57 p er cent of males. Even in wealthy states such as Punjab, girls suffer from malnutrition seven times more than boys do. The total population of the country was 90 crore in 1998 and the ratio of male to female in India was 10 to 9.

Q.

According to the information provided, what percentage of the infants in Orissa and Bihar attend Std V?

Solution:

QUESTION: 7

Bihar and Orissa are the most deprived states of India. While they contain one-fifth of India’s population, they have almost one-third of India’s illiterates. In 1998, only a small fraction of Orissa and Bihar’s population was literate versus 85 per cent of Kerala’s population. More than two-thirds of the births are not attended by any medical facility, 1/10th of the infants bom in Orissa and Bihar die in infancy and an equal number before reaching the age o f five. Alm ost 90 per cent o f the under five deaths are due to malnutrition.

From amongst the lucky kids who have survived for the first five years ,1/3rd o f them work as child labourers and only half of the remaining are sent to school. Of those who attend classes, only 40 per cent are able to reach Std V. In India, 30 per cent of the children under 16 work as labourers. Orissa and Bihar contain 1/3rd o f the child labourer* in India. India has the largest population of chi Id labourers, which is 1/15th o f its total population.

In Orissa and Bihar, out o f 100 children enrolled in school, 32 are girls. And out of 100 who attend Std X, only 10 are girls. Only 38 out of 100 Indian women are literate versus 57 p er cent of males. Even in wealthy states such as Punjab, girls suffer from malnutrition seven times more than boys do. The total population of the country was 90 crore in 1998 and the ratio of male to female in India was 10 to 9.

Q.

In Orissa and Bihar, out of 100 bom, approximately howr many children work as child labourers?

Solution:

QUESTION: 8

Bihar and Orissa are the most deprived states of India. While they contain one-fifth of India’s population, they have almost one-third of India’s illiterates. In 1998, only a small fraction of Orissa and Bihar’s population was literate versus 85 per cent o f K erala’s population. More than two-thirds of the births are not attended by any medical facility, 1/10th of the infants bom in Orissa and Bihar die in infancy and an equal number before reaching the age o f five. Alm ost 90 per cent o f the under five deaths are due to malnutrition.

From amongst the lucky kids who have survived for the first five years ,1/3rd o f them work as child labourers and only half of the remaining are sent to school. Of those who attend classes, only 40 per cent are able to reach Std V. In India, 30 per cent of the children under 16 work as labourers. Orissa and Bihar contain 1/3rd o f the child labourer* in India. India has the largest population of chi Id labourers, which is 1/15th o f its total population.

In Orissa and Bihar, out o f 100 children enrolled in school, 32 are girls. And out of 100 who attend Std X, only 10 are girls. Only 38 out of 100 Indian women are literate versus 57 p er cent of males. Even in wealthy states such as Punjab, girls suffer from malnutrition seven times more than boys do. The total population of the country was 90 crore in 1998 and the ratio of male to female in India was 10 to 9.

Q.

In 1998, the literates in Kerala exceed the literates in UP and Bihar by:

Solution:

Since we do not know the exact population of Kerala, Orissa and Bihar, the answer cannot be found.

QUESTION: 9

Bihar and Orissa are the most deprived states of India. While they contain one-fifth of India’s population, they have almost one-third of India’s illiterates. In 1998, only a small fraction of Orissa and Bihar’s population was literate versus 85 per cent o f K erala’s population. More than two-thirds of the births are not attended by any medical facility, 1/10th of the infants bom in Orissa and Bihar die in infancy and an equal number before reaching the age o f five. Alm ost 90 per cent o f the under five deaths are due to malnutrition.

From amongst the lucky kids who have survived for the first five years ,1/3rd o f them work as child labourers and only half of the remaining are sent to school. Of those who attend classes, only 40 per cent are able to reach Std V. In India, 30 per cent of the children under 16 work as labourers. Orissa and Bihar contain 1/3rd o f the child labourer* in India. India has the largest population of chi Id labourers, which is 1/15th o f its total population.

In Orissa and Bihar, out o f 100 children enrolled in school, 32 are girls. And out of 100 who attend Std X, only 10 are girls. Only 38 out of 100 Indian women are literate versus 57 p er cent of males. Even in wealthy states such as Punjab, girls suffer from malnutrition seven times more than boys do. The total population of the country was 90 crore in 1998 and the ratio of male to female in India was 10 to 9.

Q.

The number of illiterates in Orissa and Bihar in 1998 is al most :

Solution:

QUESTION: 10

It was realised by AMS Careers, that for creating awareness in the market, newspaper advertising is very effective but it should be done consistently. The Timex of India (T O l) which claims to have 40 percent of the total market share brings out a weekly supplement ‘Education Times’ in which the advertising cost for the range 0 to 240 sq.cm for 1-2 insertions with a validity period o f 30 days is Rs 50/cm^{2}, for 3-5 insertions with a validity period of 60 days is Rs 43/cm^{2} and 6 onwards insertions with validity period of 90 days is Rs 40/cm^{2}. The cost for size of advertisement 241+ cm^{2} for 1-2 insertions with validity period 30 days is Rs 50/cm2 and for 3-5 insertions with validity period 60 days is Rs 40/cm^{2} and for 6 onwards insertion with validity period of 90 days is Rs 35/cm^{2}. The expected response generation per insertion in TOl in the size 161-200 cm^{2} is 40 and in the size 200 + cm^{2} is 50. Another great market player is Hindustan Times with the weekly supplement ‘HT Horizons’ and it claims to have 35% o f the total market share and the cost o f advertising in it for 1-2 insertions with validity period: Number o f insertion + one week is Rs 40/cm^{2}. for 3 - 6 insertions with validity period: Number of insertions + 2 weeks is Rs 37/cm^{2} and for 7 insertions onwards with validity' period: no of insertions + 3 weeks is Rs 34/cm^{2}. The expected response generation per insertion is 35 for 160- 200cm^{2} and 45 for 200+ cm^{2} size.

Please help AMS Careers with the correct decisions on the following plans.

Q.

AMS has decided to advertise in TOl but is confused on length between 80 cm and 81 cm but is sure about the width, i.e., 3 cm and 3 insertions. What should be the length?

Solution:

The solution will be got by comparing the cost of the two campaigns against one another. Since the expected response is the same, Cost of 3 insertions of 240 cm^{2} = 43 x 240 X 3=720 x 43 = Rs 30,960 Cost of 3 insertions o f 81 x 3 = 243 cm^{2} = 40 x 243 x 3 = 729 x 40 = Rs 29,160

AMS should go for a height of 81 cm since the cost of the campaign is lower.

QUESTION: 11

It was realised by AMS Careers, that for creating awareness in the market, newspaper advertising is very effective but it should be done consistently. The Timex of India (T O l) which claims to have 40 percent of the total market share brings out a weekly supplement ‘Education Times’ in which the advertising cost for the range 0 to 240 sq.cm for 1-2 insertions with a validity period o f 30 days is Rs 50/cm^{2}, for 3-5 insertions with a validity period of 60 days is Rs 43/cm^{2} and 6 onwards insertions with validity period of 90 days is Rs 40/cm^{2}. The cost for size of advertisement 241+ cm^{2} for 1-2 insertions with validity period 30 days is Rs 50/cm2 and for 3-5 insertions with validity period 60 days is Rs 40/cm^{2} and for 6 onwards insertion with validity period of 90 days is Rs 35/cm^{2}. The expected response generation per insertion in TOl in the size 161-200 cm^{2} is 40 and in the size 200 + cm^{2} is 50. Another great market player is Hindustan Times with the weekly supplement ‘HT Horizons’ and it claims to have 35% o f the total market share and the cost o f advertising in it for 1-2 insertions with validity period: Number o f insertion + one week is Rs 40/cm^{2}. for 3 - 6 insertions with validity period: Number of insertions + 2 weeks is Rs 37/cm^{2} and for 7 insertions onwards with validity' period: no of insertions + 3 weeks is Rs 34/cm^{2}. The expected response generation per insertion is 35 for 160- 200cm^{2} and 45 for 200+ cm^{2} size.

Please help AMS Careers with the correct decisions on the following plans.

Q.

If AMS decides to go in for an advertising campaign o f 10 insertions, which will be the best option (in terms o f cost) for a size o f 243 era2?

Solution:

Cost of campaign in TOI = 243 x 35 x 10.

Cost of campaign in HT = 243 x 34 x 10

∴ HT is better in terms of cost.

QUESTION: 12

It was realised by AMS Careers, that for creating awareness in the market, newspaper advertising is very effective but it should be done consistently. The Timex of India (T O l) which claims to have 40 percent of the total market share brings out a weekly supplement ‘Education Times’ in which the advertising cost for the range 0 to 240 sq.cm for 1-2 insertions with a validity period o f 30 days is Rs 50/cm^{2}, for 3-5 insertions with a validity period of 60 days is Rs 43/cm^{2} and 6 onwards insertions with validity period of 90 days is Rs 40/cm^{2}. The cost for size of advertisement 241+ cm^{2} for 1-2 insertions with validity period 30 days is Rs 50/cm2 and for 3-5 insertions with validity period 60 days is Rs 40/cm^{2} and for 6 onwards insertion with validity period of 90 days is Rs 35/cm^{2}. The expected response generation per insertion in TOl in the size 161-200 cm^{2} is 40 and in the size 200 + cm^{2} is 50. Another great market player is Hindustan Times with the weekly supplement ‘HT Horizons’ and it claims to have 35% o f the total market share and the cost o f advertising in it for 1-2 insertions with validity period: Number o f insertion + one week is Rs 40/cm^{2}. for 3 - 6 insertions with validity period: Number of insertions + 2 weeks is Rs 37/cm^{2} and for 7 insertions onwards with validity' period: no of insertions + 3 weeks is Rs 34/cm^{2}. The expected response generation per insertion is 35 for 160- 200cm^{2} and 45 for 200+ cm^{2} size.

Please help AMS Careers with the correct decisions on the following plans.

Q. If the only consideration for the choice of the newspaper is the number of responses, then AMS should run the campaign of Question 22 in:

Solution:

TOI will give an expected response of 50 x 10 = 500 while HT will given an expected response of 45 x 10 = 450. Hence, TOI will be a better option in term s o f numbers o f responses.

QUESTION: 13

Mr Kunal Dwivcdi wants to buy a motorbike which is priced at Rs 45.500. The bike is also available at Rs 25,000 down payment and monthly installments of Rs 1000 per month for 2 years or Rs 18,000 down payment and monthly installment of Rs 1000 per month for 3 years. Mr Kunal has w ith him only Rs 12,000. He wants to borrow the balance money of the down payment from a private lender whose terms are: If Rs 6,000 is borrow ed for 12 months, the rate o f interest is 20 per cent. The interest will be calculated on the whole amount for the whole year, even though the repayment has to be done in 12 equal monthly installments starting from the first month itself. Thus he will have to repay an amount of Rs 600 per month for 12 months to repay Rs 6000 (Principal) + Rs 1200 (Interest @ 20 per cent).

If Rs 10,000 upwards is borrowed for one year, the rate of interest is 30 per cent and is calculated in exactly the same manner as above.

Q.

What is the percentage di fference in the total amount paid to the bike dealer, between the two installment schem es (with respect to the total payment o f the scheme with Rs 25,000 down payment)?

Solution:

Total cost on down payment of 25,000 = 25,000 + 24.000 - Rs 49.000 Total cost on down payment of 18,000 = 18,000 + 36.000 = Rs 54,000 Required answer = 5000/49,000 is approximately equal to 10.2%

QUESTION: 14

Fabric X has to go through three stages of manufacturing, viz., spinning, weaving and dyeing. In Rimal Fabric Company, there arc six spinning machines, ten weaving machines and five dyeing machines. Each machine works for 10 hrs a day. One unit of Fabric X needs 40 minutes on a spinning machine, 2 hours on a weaving machine and 30 minutes on a dyeing machine in order to be completed. Similarly one unit of Fabric Y needs 60 minutes on a spinning machine, 30 minutes on a weaving machine and 60 minutes on a dyeing machine in order to be completed.

Q. In a day, how many units of Fabric Y can be completed at most?

Solution:

QUESTION: 15

Fabric X has to go through three stages of manufacturing, viz., spinning, weaving and dyeing. In Rimal Fabric Company, there arc six spinning machines, ten weaving machines and five dyeing machines. Each machine works for 10 hrs a day. One unit of Fabric X needs 40 minutes on a spinning machine, 2 hours on a weaving machine and 30 minutes on a dyeing machine in order to be completed. Similarly one unit of Fabric Y needs 60 minutes on a spinning machine, 30 minutes on a weaving machine and 60 minutes on a dyeing machine in order to be completed.

Q.

If only 30 units of Fabric Y arc made m a day. how many machine hours will be idle that day?

Solution:

30 units of Y will consume (30+15+30) = 75 hours totally. 135 hours will remain idle.

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