And automobile manufacturer on 35% profit by selling each car for 4520...
To determine the new selling price of a car after an increase in production cost while aiming for a different profit margin, follow these calculations.
Initial Selling Price and Profit Calculation
- Selling Price (SP) = ₹45,200
- Profit Percentage = 35%
Using the profit formula:
- Profit = SP - Cost Price (CP)
- CP = SP / (1 + Profit Percentage)
- CP = 45200 / (1 + 0.35)
- CP = 45200 / 1.35
- CP = ₹33,485.19 (approximately)
New Production Cost Calculation
- Increase in Production Cost = 20%
- New CP = CP + (20% of CP)
- New CP = 33,485.19 + (0.20 * 33,485.19)
- New CP = 33,485.19 + 6,697.04
- New CP = ₹40,182.23 (approximately)
Target Profit Calculation
- Desired Profit Percentage = 20%
- New Selling Price (NSP) = New CP * (1 + Desired Profit Percentage)
- NSP = 40,182.23 * (1 + 0.20)
- NSP = 40,182.23 * 1.20
- NSP = ₹48,218.68 (approximately)
Conclusion
To achieve a profit margin of 20% after a 20% increase in production cost, the new selling price of the car should be set at approximately ₹48,219.