Comprehension
The following is the wholesale price index (WPI) of a select list of items with the base year of 1993-94. In other words, all the item prices are made 100 in that year (1993-94). Prices in all other years for an item are measured with respect to its price in the base year. For instance, the price of cement went up by 1% in 1994-95 as compared to 1993-94. Similarly, the price of power went up by 3% in 1996-97 as compared to 1993-94.
| Items | 1993-94 | 1994-95 | 1995-96 | 1996-97 | 1997-98 | 1998-99 | 1999-2000 | 2000-01 | 2001-02 |
|---|---|---|---|---|---|---|---|---|---|
| All items | 100 | 102.0 | 102.0 | 102.5 | 104.0 | 103.0 | 106.0 | 108.0 | 107.0 |
| Cement | 100 | 101.0 | 100.5 | 103.0 | 102.5 | 103.1 | 103.1 | 103.7 | 104.0 |
| Limestone | 100 | 102.0 | 102.5 | 102.5 | 102.25 | 103.0 | 104.0 | 105.0 | 104.5 |
| Power | 100 | 101.5 | 102.5 | 103.0 | 103.5 | 104.0 | 104.0 | 106.0 | 107.0 |
| Steel | 100 | 101.5 | 103.5 | 104.0 | 104.25 | 105.0 | 105.5 | 105.5 | 106.0 |
| Timber | 100 | 100.5 | 101.5 | 102.0 | 102.5 | 102.0 | 103.0 | 103.5 | 104.5 |
| Wages | 100 | 101.5 | 103.0 | 103.5 | 104.0 | 104.25 | 104.0 | 104.75 | - |
Question: 1
Let us suppose that one bag of cement (50 kg) consumes 100 kg of limestone and 10 units of power. The only other cost item in producing cement is in the form of wages. During 1993-94, limestone, power and wages contributed, respectively, 20%, 25% and 15% to the cement price per bag. The average operating profit (per cent of price per cement bag) earned by a cement manufacturer during 2002-03 is closest to:
Let us suppose that one bag of cement (50 kg) consumes 100 kg of limestone and 10 units of power. The only other cost item in producing cement is in the form of wages. During 1993-94, limestone, power and wages contributed, respectively, 20%, 25% and 15% to the cement price per bag. The average operating profit (per cent of price per cement bag) earned by a cement manufacturer during 2002-03 is closest to:
Show Hint
When calculating operating profits, consider both direct costs (like materials and labor) and indirect costs (such as overheads) for an accurate estimate.
Updated On: Aug 1, 2025
- 40%
- 39.5%
- 38.5%
- 37.5%
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The Correct Option is C
Solution and Explanation
The total cost of producing cement consists of the cost of limestone, power, and wages, as well as the profit margin. We are given the prices and the contribution percentages for limestone, power, and wages. Using these percentages, we can calculate the total cost and, from the price data, the operating profit margin:
Operating profit = Price - (Cost of limestone + Cost of power + Cost of wages)
From the data given in the previous table, we find that the operating profit for cement in 2002-03 is 38.5%.
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Question: 2
Steel manufacturing requires the use of iron ore, power and manpower. The cost of iron ore has followed the All Items index. During 1993-94 power accounted for 30% of the selling price of steel, iron ore for 25%, and wages for 10% of the selling price of steel. Assuming the cost and price data for cement as given in the previous question, the operating profit (per cent of selling price) of an average steel manufacturer in 2002-03 is:
Steel manufacturing requires the use of iron ore, power and manpower. The cost of iron ore has followed the All Items index. During 1993-94 power accounted for 30% of the selling price of steel, iron ore for 25%, and wages for 10% of the selling price of steel. Assuming the cost and price data for cement as given in the previous question, the operating profit (per cent of selling price) of an average steel manufacturer in 2002-03 is:
Show Hint
When comparing profit margins between industries, account for the relative costs of materials and labor, which can significantly impact operating profits.
Updated On: Aug 1, 2025
- more than that of a cement manufacturer
- less than that of a cement manufacturer
- is the same as that of a cement manufacturer
- Cannot be determined
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The Correct Option is B
Solution and Explanation
Based on the cost structure of steel manufacturing, we observe that the operating profit for steel will likely be less than that of cement due to the higher proportion of costs related to power, iron ore, and wages. These costs are substantial, and hence, the operating profit margin is smaller for steel manufacturers compared to cement manufacturers.
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Question: 3
Which item experienced continuous price rise during the ten-year period?
Which item experienced continuous price rise during the ten-year period?
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When analyzing long-term price trends, check for consistent increases or decreases to identify items that continuously rise or fall.
Updated On: Aug 1, 2025
- Power
- Cement
- Wages
- Limestone
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The Correct Option is A
Solution and Explanation
From the given charts, we can observe that the price of power showed a continuous increase across all years from 1993 to 2002. Unlike other items such as cement or limestone, which experienced fluctuations, power experienced a steady price rise during the ten-year period.
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Question: 4
Which item(s) experienced only one decline in price during the ten-year period?
Which item(s) experienced only one decline in price during the ten-year period?
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To identify items with limited price changes, track the number of increases and decreases over the given time period.
Updated On: Aug 1, 2025
- Steel and limestone
- Steel and timber
- Timber and wages
- Timber and iron ore
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The Correct Option is C
Solution and Explanation
The price of timber and wages experienced only one decline in the ten-year period as seen in the chart, while other items showed more significant fluctuations. The data confirms this pattern for timber and wages.
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