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

Ganga Plastics produced 4,000 units in a month. Total cost was Rs 2,80,000. It wants a selling price giving a profit of 25% on selling price. What selling price per unit should it fix?

The selling price should be Rs 93.33 per unit. Cost per unit is Rs 70, and since profit is 25% of selling price, cost equals 75% of price, so price is 70 divided by 0.75. Adding 25% to cost would wrongly give Rs 87.50.

  1. ARs 87.50
  2. BRs 93.33Correct
  3. CRs 70.00
  4. DRs 96.25

Explanation

Cost per unit = 2,80,000/4,000 = Rs 70. Profit is 25% of selling price, so cost is 75% of price. Price = 70/0.75 = Rs 93.33. Rs 87.50 wrongly adds 25% on cost (70 x 1.25).

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