Question

A company produces 5 products: P, Q, R, S, and T. The profit margins (in %) are: P-10%, Q-15%, R-20%, S-5%, T-25%. If the company earns a total profit of ₹21,20,000 from equal sales (₹21,00,000) of each product, what is the average profit percentage across all products?

• A. 15%
• B. 12%
• C. 14%
• D. 13%

Hint:

When sales are equal, average profit margin = average of individual profit percentages.

Answer 1

The Correct Option is A

To ascertain the overall average profit percentage for all products, we must first calculate the individual profit for each product by applying their respective profit margins to their sales. Subsequently, the aggregate profit percentage will be determined. The company has achieved a total profit of ₹21,20,000 from uniform sales of ₹21,00,000 for each of the 5 products.

The methodology is as follows:

1. Compute the profit for each product using the formula: Profit = (Profit Margin / 100) × Sales.
2. Aggregate the profits from all products to derive the total profit.
3. Calculate the aggregate sales across all products and then determine the average profit percentage using the formula: Average Profit Percentage = (Total Profit / Total Sales) × 100.

Product	Profit Margin (%)	Sales (₹)	Profit (₹)
P	10	21,00,000	(10/100)×21,00,000 = 2,10,000
Q	15	21,00,000	(15/100)×21,00,000 = 3,15,000
R	20	21,00,000	(20/100)×21,00,000 = 4,20,000
S	5	21,00,000	(5/100)×21,00,000 = 1,05,000
T	25	21,00,000	(25/100)×21,00,000 = 5,25,000

Total Profit = 2,10,000 + 3,15,000 + 4,20,000 + 1,05,000 + 5,25,000 = 15,75,000

Total Sales = 21,00,000 × 5 = 1,05,00,000

Average Profit Percentage = (15,75,000 / 1,05,00,000) × 100 = 15%

Consequently, the average profit percentage across all products stands at 15%.