CMA Final · Entrepreneurship and Startup · Value Addition
Case: Kavya Agritech sources 1,000 kg of turmeric at ₹80 per kg. It can (A) sell it raw at ₹100 per kg, or (B) process it into powder with a 90% yield, incurring extra processing and packing cost of ₹12,000 in total, and sell the powder at ₹130 per kg. Taking incremental profit as the test, which statement is correct?
Processing is better by ₹5,000. Selling raw gives ₹1,00,000, while processing yields 900 kg of powder worth ₹1,17,000, which is ₹1,05,000 after ₹12,000 of processing cost. The common purchase cost cancels out, leaving a ₹5,000 advantage.
- AB is better by ₹5,000 over ACorrect
- BB is better by ₹17,000 over A
- CA is better by ₹5,000 over B
- DA and B give equal profit
Explanation
Option A: revenue 1,000 × 100 = ₹1,00,000. Option B: powder 900 kg × 130 = ₹1,17,000, less processing ₹12,000 = ₹1,05,000. The purchase cost is common to both. B exceeds A by ₹5,000. The ₹17,000 figure forgets to deduct processing cost.
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