Ramanna purchased raw materials for a certain price to manufacture a product. However, owing to a shortage of labor, 22.5% of the raw materials could not be utilized and got wasted. 80% of the cost of raw materials used was added as the cost of manufacturing. If Ramanna could sell his product at a price to earn an overall profit of 20% after offering a discount of 20%, how many times the total cost of the raw materials purchased was the marked price of the product?
Show answer & explanation
Correct answer: A
Explanation
The correct answer is Option 1 i.e. 2.43 times.
Let Ramanna purchase 100 kg of raw material at a cost of ₹1 per kg
So, Total cost of raw material = ₹100
Out of 100 kg, he used only 77.5 kg of raw material
Cost of raw material used = ₹77.5
According to the question, Ramanna added 80% of the cost of raw materials to the manufacturing cost
So, Total manufacturing cost = 100 + [77.5 × (80/100)]
⇒ 100 + 62 = ₹162
Now, he wants a profit of 20%
S.P. = CP × (100 + Profit%)/100
⇒ SP = 162 × (120/100) = ₹194.4
He also offers a discount of 20% on the marked price
MP = SP × (100 - Discount%)/100
⇒ MP = 194.4 × (100/80) = ₹243
The cost price of raw material = ₹100
Thus,
The MP is 2.43 times the cost of the raw materials purchased.