Actual Costs incurred by the Company

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(CAT 2007)

The following table shows the break-up of actual costs incurred by a company in last five years (year 2002 to year 2006) to produce a particular product:



The production capacity of the company is 2000 units. The selling price for the year 2006 was Rs. 125 per unit. Some costs change almost in direct proportion to the change in volume of production while others do not follow any obvious pattern of change with respect to the volume of production and hence are considered fixed. Using the information provided for the year 2006 as the basis for projecting the figures for the year 2007, answer the following questions:

1. What is the approximate cost per unit in rupees, if the company produces and sells 1400 units in the year 2007?
a. 104
b. 107
c. 110
d. 115
e. 116

2. What is the minimum number of units that the company needs to produce and sell to avoid any loss?
a. 313
b. 350
c. 384
d. 747
e. 928

3. If the company reduces the price by 5%, it can produce and sell as many units as it desires. How many units the company should produce to maximize its profit?
a. 1400
b. 1600
c. 1800
d. 1900
e. 2000

4.  Given that the company cannot sell more than 1700 units, and it will have to reduce the price by Rs.5 for all units, if it wants to sell more than 1400 units, what is the maximum profit, in rupees, that the company can earn?
a. 25,400
b. 24,400
c. 31,400
d. 32,900

e. 32,000


For answers click here.

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