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Rotomac produces very fine quality of writing pens. Company knows that on average 10% of the produced pens are always defective so are rejected before packing. Company promises to deliver 7200 pens to its wholesaler at Rs. 10 each. It estimates the overall profit on all the manufactured pens to be 25%. What is the manufacturing cost of each pen?
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- Rs. 6
- Rs. 7.2
- Rs. 5.6
- Rs. 8
Correct Option: B
You must know that the company is able to deliver only 90% of manufactured pens. So let k be the manufacturing price of a pen, then
Total income (including 25% profit) = 8000 x k x 1.25
Also this same income is obtained by selling 90% manufactured at Rs.10 which is equal to 7200 x 10.
Thus 8000 x K x 1.2 = 7200 x 10
⇒ K = Rs. 7.2 ( 90% of 8000 = 7200)
