CMA Intermediate · Cost Accounting · Job Costing
Job 17 of Narmada Fabricators has a total cost of ₹90,000. The firm quotes a price that gives a profit of 20% on the selling price. What is the quoted price?
The quoted price is ₹1,12,500. Since profit is 20% of selling price, cost represents 80% of price, so price equals ₹90,000 divided by 0.8. Adding 20% to cost instead would give ₹1,08,000, which is a profit on cost.
- A₹1,08,000
- B₹1,12,500Correct
- C₹1,10,000
- D₹1,18,000
Explanation
Profit is 20% of price, so cost is 80% of price. Price = 90,000 ÷ 0.80 = 1,12,500. Check: 20% of 1,12,500 = 22,500 and 1,12,500 − 22,500 = 90,000. The option ₹1,08,000 wrongly adds 20% on cost.
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