Practicing Success

Target Exam

CUET

Subject

Entrepreneurship

Chapter

Business Arithmetic

Question:

Read the passage given below to answer the questions :

A successful food entrepreneur today, Debashish Majumdar belonged to a lower middle class back ground, studied to become a banker. He got his first job as an office assistant. He rose from being an office assistant to the chief accountant and later on pursued a career as a banker with a good salary. After some time he quit his job and the first business he started in 2017, which was an ice cream shop. That did not take off and he made a loss of almost 10 lakh rupees. Idea to start a momo joint came to him when he visited an outlet in Guwahati and felt he could have served better momos. With a loan of about 23.5 lakh with an interest rate of 10 per cent, he launched 'Momomia' is 2018. He ensured that the location was prime to ensure good footfall. That also meant higher rent rate. He started operations with a team of three others. Eventually when he approached investors, he was told his operations were too small to be considered. Monthly sales in the first years were touching about Rs. 1.5 lakh, political turmoil in the state started. The pressure of returning the loan amount was also growing. Gradually situation become better, soon business picked up and in Feb. 2021, first franchise store was opened in Haridwar. Franchise model worked so well for him that he has opened up 55 such franchise outlets in Assam, Arunachal Pradesh, Bihar, Gujrat, Uttar Pradesh and Madhya Pradesh.

'Momomia' provides employment to over 200 people across 50+ outlets. Mean while Momomia's customers can choose from 100 difference kinds of momos.

As per the case study, calculate total sales in the first year of operations and also calculate the interest paid by him over 5 years on the loans taken by him respectively.

(a) 11,75,000

(b) 18,00,000

(c) 15,000

(d) 1, 75,000

(e) 1,80,000

Choose the most appropriate answer from the options given below:

Options:

(b) and (a)

(b) and (d)

(d) and (e)

(b) and (c)

Correct Answer:

(b) and (a)

Explanation:

Total sales in the first year of operations

Monthly sales in the first year were Rs. 1.5 lakh, which is Rs. 1,50,000. Therefore, the total sales in the first year of operations were:

Rs. 1,50,000/month * 12 months = Rs. 18,00,000

Interest paid on the loan over 5 years

The loan amount was Rs. 23.5 lakh at an interest rate of 10%. Therefore, the annual interest payment would be:

Rs. 23,50,000 * 10% = Rs. 2,35,000

To calculate the total interest paid over 5 years, we would multiply the annual interest payment by 5:

Rs. 2,35,000/year * 5 years = Rs. 11,75,000

Therefore, the total interest paid on the loan over 5 years would be Rs. 11,75,000.