CMA Foundation · Fundamentals of Financial and Cost Accounting · Statement of Cost and Profit (Cost Sheet)
Mehta Constructions is quoting for a job with total cost of Rs 2,50,000. It wants a profit equal to 25% on cost. What is the tender price?
The tender price is Rs 3,12,500. Profit of 25% on cost equals Rs 62,500, which is added to the cost of Rs 2,50,000. Dividing by 0.75 would be right only if profit were stated as a percentage of selling price.
- ARs 3,12,500Correct
- BRs 3,33,333
- CRs 2,75,000
- DRs 3,00,000
Explanation
Profit = 25% of 2,50,000 = Rs 62,500. Tender price = 2,50,000 + 62,500 = Rs 3,12,500. Rs 3,33,333 wrongly treats 25% as a margin on selling price, dividing cost by 0.75.
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