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Directions: Choose the correct answer.
Q. If the manufacturer gains 10%, the wholesale dealer gains 15% and the retailer gains 25%, find the cost of production of a table. The retail price of the table is Rs.1265
  • a)
    Rs. 800
  • b)
    Rs. 1000
  • c)
    Rs. 950
  • d)
    Rs.1180
Correct answer is option 'A'. Can you explain this answer?
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Understanding the Problem
To find the cost of production of the table when the retail price is Rs. 1265, we need to consider the profit margins at each level of the supply chain: the manufacturer, the wholesale dealer, and the retailer.
Profit Margins Breakdown
- Manufacturer's Gain: 10%
- Wholesale Dealer's Gain: 15%
- Retailer's Gain: 25%
Calculating Backwards from the Retail Price
1. Retail Price (RP): Rs. 1265
2. Retailer's Cost (RC):
- Since the retailer gains 25%, the cost to the retailer can be calculated as:
- RC = RP / (1 + Retailer's Gain) = 1265 / (1 + 0.25) = 1265 / 1.25 = Rs. 1012
3. Wholesale Price (WP):
- The wholesaler gains 15%, so the cost to the wholesaler can be calculated as:
- WP = RC / (1 + Wholesaler's Gain) = 1012 / (1 + 0.15) = 1012 / 1.15 = Rs. 880
4. Cost of Production (CP):
- The manufacturer gains 10%, so the cost of production can be calculated as:
- CP = WP / (1 + Manufacturer's Gain) = 880 / (1 + 0.10) = 880 / 1.10 = Rs. 800
Conclusion
The cost of production of the table is Rs. 800, which corresponds to option 'A'.
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