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CMA Foundation · Fundamentals of Financial and Cost Accounting · Meaning and Significance of Cost Accounting and its Relationship with Financial Accounting

Ananya Textiles finds that the cost of making a shirt is ₹400 against a selling price of ₹520. A competitor sells a similar shirt at ₹450. Using cost data, the firm decides to match ₹450. What is the profit per shirt and the profit as a percentage of the new selling price (rounded to the nearest whole number)?

At the new price of ₹450 and a cost of ₹400, profit per shirt is ₹50. As a percentage of the selling price, this is 50 divided by 450, about 11%. Cost data lets the firm confirm that matching the competitor still leaves a profit.

  1. A₹50 and 11%Correct
  2. B₹50 and 13%
  3. C₹120 and 27%
  4. D₹70 and 16%

Explanation

Profit = 450 − 400 = ₹50. Profit on selling price = 50/450 × 100 = 11.1%, about 11%. The 13% option wrongly uses cost as base (50/400 = 12.5%). The ₹120 option ignores the price cut and uses the old price.

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