Company Writewell produces quality ball pens. If on average 4% of the produced pens are always defective so are rejected before packing. Company promises to deliver 8400 pens to its wholesaler at Rs. 8 each. It estimates the overall profit on all the manufactured pens to be 25%. What is the manufacturing cost of each pen?
As 4% pens are defective,so company is able to deliver only 96% of manufactured pens, hence to deliver 8400 pens company has to to produce 8400*(100/96) = 8750 pens
Total income by selling 8400 pens @ Rs. 8 pen pen = 8400 x 8 = 67200
As income 67200 is 125% of the manufacturing cost of total 8750 pens .'. cost of 8750 pens = 67200 x 100/125 = 53760
Therefore, cost of each pen = 53760/8750 = 6.144
Correct Option 5)