If a company has incurred expenses of Rs. 10,000 and it wants a profit margin of 20% on cost, at what rate will a company sell its product?
Answer & explanation
Correct answer: option 2
To achieve a 20% profit margin on the cost of Rs. 10,000, you need to add 20% of the cost to the cost itself to determine the selling price.
Profit Margin = 20% of Cost Profit Margin = 0.20 * Rs. 10,000 Profit Margin = Rs. 2,000
Now, to find the selling price, you add the profit margin to the cost:
Selling Price = Cost + Profit Margin Selling Price = Rs. 10,000 + Rs. 2,000 Selling Price = Rs. 12,000
So, the company should sell its product at a rate of Rs. 12,000 to achieve a 20% profit margin on the cost of Rs. 10,000.