In a manufacturing unit, it was noted that the price of raw material has increased by 25% and the labour cost has gone up from 30% of the cost of raw material to 38% of the cost of the raw material. What percentage of the consumption of raw material be reduced to keep the cost the same as that before the increase ?
Answer & explanation
Correct answer: option 3
Let, the cost price of raw material = 100x
The new cost of price of raw material = 100x + 25% of 100x = 125x
The cost of the labour = 130% of 100x = 130x
The new cost of the labour = 138% of 125x = 172.5x
The consumption should be reduced = 172.5x - 130x = 42.5x
The percentage of consumption reduced =
= \(\frac{42.5}{172.5}\)× 100
= 24.63...%
= 24.6% (approx)