A textile manufacturing firm employs 50 looms. It makes fabrics for a branded company. The aggregate sales value of the output of the 50 looms is Rs. 5,00,000 and the monthly manufacturing expenses is Rs. 1,50,000. Assume that each loom contributes equally to the sales and the manufacturing expenses are evenly spread over the number of looms. Monthly establishment charges are Rs. 75,000. If one loom breaks down and remains idle for one month, the decrease in profit is

Options

A. Rs. 13000
B. Rs. 10000
C. Rs. 7000
D. Rs. 5500

Answer

To find the decrease in profit when one loom breaks down, we can follow these steps:

### Step 1: Calculate the total sales value from 50 looms.
The total sales value of the output from 50 looms is given as Rs. 5,00,000.

### Step 2: Calculate the monthly manufacturing expenses for 50 looms.
The monthly manufacturing expenses are given as Rs. 1,50,000.

### Step 3: Calculate the monthly establishment charges.
The monthly establishment charges are Rs. 75,000.

### Step 4: Calculate the total profit for 50 looms.
Total profit can be calculated using the formula:
\[ \text{Total Profit} = \text{Total Sales} - \text{Total Manufacturing Expenses} - \text{Establishment Charges} \]
Substituting the values:
\[ \text{Total Profit} = 5,00,000 - 1,50,000 - 75,000 \]
\[ \text{Total Profit} = 5,00,000 - 2,25,000 \]
\[ \text{Total Profit} = 2,75,000 \]

### Step 5: Calculate the sales value when one loom is idle (49 looms).
The sales value per loom is:
\[ \text{Sales per loom} = \frac{5,00,000}{50} = 10,000 \]
For 49 looms, the sales value will be:
\[ \text{Sales from 49 looms} = 10,000 \times 49 = 4,90,000 \]

### Step 6: Calculate the manufacturing expenses for 49 looms.
The manufacturing expense per loom is:
\[ \text{Manufacturing Expense per loom} = \frac{1,50,000}{50} = 3,000 \]
For 49 looms, the manufacturing expense will be:
\[ \text{Manufacturing Expense for 49 looms} = 3,000 \times 49 = 1,47,000 \]

### Step 7: Calculate the new total profit for 49 looms.
Using the same profit formula:
\[ \text{New Total Profit} = \text{Sales from 49 looms} - \text{Manufacturing Expenses for 49 looms} - \text{Establishment Charges} \]
Substituting the values:
\[ \text{New Total Profit} = 4,90,000 - 1,47,000 - 75,000 \]
\[ \text{New Total Profit} = 4,90,000 - 2,22,000 \]
\[ \text{New Total Profit} = 2,68,000 \]

### Step 8: Calculate the decrease in profit.
The decrease in profit is:
\[ \text{Decrease in Profit} = \text{Old Profit} - \text{New Profit} \]
Substituting the values:
\[ \text{Decrease in Profit} = 2,75,000 - 2,68,000 \]
\[ \text{Decrease in Profit} = 7,000 \]

### Final Answer:
The decrease in profit when one loom breaks down and remains idle for one month is Rs. 7,000.

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