Question
Find the cost of manufacturing each article if a
manufacturer estimates that on inspection 20% of the articles he produces will be rejected. He accepts an order to supply 55,000 articles at Rs. 7.5 each. He estimates the profit on his outlay including the manufacturing of rejected articles to be 20%.Solution
If 100 articles are manufactured then 20 will be rejected Total selling price of 80 articles = 80 × 7.5 = 600 Total cost price = (600 x 100)/120 = 500 cost of manufacturing per article = 500/100 = Rs 5
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