DIRECTIONS for questions 1-5:Refer to the following information and answer the questions that follow:
For a certain company profit = Revenue – FC – VC where FC is fixed cost and VC is the variable cost of the company. If production is less than or equal to 34 units then FC =Rs 50 and for production more than 34 units then FC will increase to Rs. 90. Production never exceeds 50 units. The values for revenues and VC are Rs 750 and Rs 500 respectively for the production of 50 units. The VC and revenue is always proportional to the number of units produced or sold.
Option: 4 Explanation: You can calculate the revenue for 50 units as 750, hence SP per unit is 750/50 = Rs. 15.
The variable cost per unit is 500/50 = Rs. 10.
Thus every one unit gives Rs. 5 extra.
For production less than 34 units, the FC = Rs 50.
In this case if we produce 10 units there is no loss and no profit.
If production is less than 40, which of the following is the number of units that should be produced and sold to get the maximum profit?
1. 30
2. 35
3. 32
4. 38
Option: 3 Explanation: Production is less than 40.
But every unit gives us 5 Rs. more as calculated in the last question.
But after 34 units the cost becomes Rs. 40 more
(90 – 50).
Therefore only 8 more units can give the same profit as it is in case of 34 units.
But the production is less than 40 units and out of the options, the highest option less than 34 is our answer. Hence option 3 is the perfect choice.
What minimum number is to be produced for at least Rs. 40 as profit?
1. 12
2. 20
3. 18
4. 36
Option: 3 Explanation: At 10 units as calculated in the above question the fixed cost is completely covered. Now to have a profit of Rs. 40 the production should be 40/5 = 8 units more than 10 i.e. 18 units.
Hence option 3.
If the fixed cost is Rs. 90 at all levels of production, what is the minimum production for zero loss?
1. 18
2. 13
3. 15
4. 28
Option: 1 Explanation: Every unit produced gives 5 Rs. extra.
In order to cover the new fixed cost, which is Rs 90, the units produced should be 90/5 = 18 units.
Hence option 1st is the answer.
If production is not greater than 45 units, how much should be produced for maximum profit?
1. 44
2. 45
3. 33
4. 35
Option: 2 Explanation: As calculated in the above question, the profit at 34 units will be the same as at 34 + 8 = 42 units.
Higher than that, the profit will increase by Rs 5/unit . But maximum possible production is 45 units, hence option 2nd is the answer.
DIRECTIONS for questions 6 to 10: Refer to the following information and answer the questions that follow:
The good news about India’s PC market is that it has snapped back from its recent decline (down 6.3% in the value terms in 2001) and, in fact, is growing faster than the global market. The bad news is that its growth rate is insufficient to put the country into the ranks of major IT-empowered economies.
According to a study from Skoch Consultancy Services, an Indian research firm, the domestic PC market is expected to expand at 5-7% in 2002 (Compared with 2% for the whole world), a rate that will jump to 15-25% next year. But even this brisk pace is slower than that of China, its main IT rival in Asia, and leaves India’s market only about one quarter the size of China’s. Skoch estimates that just 7.5 million PCs were in use in 2001, very low penetration considering that India’s population is 1 bn, about 80% of China’s. Also, India and China together account for 10% of world PC market in 2001.
To increase that number dramatically, PC sales would have to return to their pre-2000 levels when the market exploded by 50%. India’s National Association of Software and Services Companies (NASSCOM) wants to stimulate sales by reducing the government’s stiff import duties (40-50%) on imported PCs. (China’s import levies are much lower, just 25%.) NASSCOM says that high prices due to import taxes make PC unaffordable to all but 7 million households. But it is not clear how much impact a tax reduction would have, since the majority of PCs sold in India are no-name units assembled locally.
How many Personal Computers’ were in use per one thousand population in China in Year 2001?
1. 7.5
2. 30
3. 28
4. 24
Option: 4 Explanation: India s population is 1 bn
Its 80% of China s population
So population of China is 1/0.8 = 1.25 bn
PC’s in India is 7.5 mn,
It is 1/4th of China
So PCs in China is 30 mn.
For 1.25 bn population China has 30 mn PCs
For 1000 population China has 1000 x 30 mn/1.25 x 1000 = 24. Hence option 4
NASSCOM is cautiously optimistic that the PC market would once again grow at pre-2000 levels from 2004 onwards. In the most optimistic scenario, in which year is the Indian PC market expected to triple from 2001 levels?
1. 2004
2. 2005
3. 2006
4. 2007
Option: 2 Explanation: Let there are 100 PCs in India in the year 2001. Now consider the most optimistic scenario means taking the highest growth possible. So the number of PCs in 2002 will be 107. In the year 2003 it will be 107 + 27(i.e. 25% of 107) = 134. In the year 2004 it will be 134 + 67 (i.e. 50% of 134) = 201. In the year 2005 it will be 201 + 100 (50% of 201) = 301. In the year 2005 it will be tripled as compared to 2001. Hence option 2
In 2001, the ratio of PC penetration in India to the PC penetration in China is:
(Penetration is defined as the number of PC’s per thousand of population)
Option: 1 Explanation: The ratio will be PC/Population for India as well as for China…. And it will be 7.5 mn/1 bn for India and 30 mn/1.25 bn for China. The ratio will finally become (7.5 x 106 / 1 x 1012 ) : (1.25 x 1012 / 30 x 106 ) = 5 : 16. Hence option 1
In above question had the population of India in 2001 be 25% more, then the ratio of PC penetration in India to the PC penetration in China in 2001 would have been
1. 5 : 4
2. 1 : 4
3. 2 : 5
4. 5 : 8
Option: 2 Explanation: The required ratio = (7.5 x 106 / 1.25 x 1012 ) : (1.25 x 1012 / 30 x 106 ) = 1:4. Hence option 2
If there was a 20% increase in usage of PC in India as compared to 2001, then how many PCs were in use in India in 2002?
1. 7.8 mn
2. 9mn
3. 136mn
4. 11mn
Option: 2 Explanation: Required number = 1.2 x 7.5 = 9mn. Hence option 2
