Comprehension
Mulchand Textiles produces a single product of only one quality – waterproof synthetic fabric. Mr.Sharma, the cost accountant of Mulchand Textiles, estimated the costs of Mulchand Textiles for different possible monthly output levels. Before he could tabulate his estimates his computer crashed, and Mr. Sharma lost all data. Fortunately he had some printouts of some incomplete tables, charts and diagrams. The table titled “Variable Cost Estimates of Mulchand Textiles” provided the estimates of labour and material costs.
Variable Cost Estimates of Mulchand Textiles
Output (Square feet)Labour cost (Rs.)Material cost (Rs.)
250002150011050
500004150022000
750006000033000
1000007800044000
1250009500054750
15000011100065700
17500013300076650
20000016000088000
Apart from labour and material costs Mulchand Textiles incurs administrative costs of Rs. 40,000 per month, and electricity costs. Mr. Sharma recalled that estimate data of variable electricity cost had certain peculiar characteristics. Values at every 25000 sq ft of output increased in geometric progression till 150000 sq ft of output, after which values increased in arithmetic progression for every 25000 sq ft of output. Mr. Sharma remembered that the electricity cost was estimated to be Rs. 3800 for 25000 sq.ft. of output, Rs. 5700 for 50000 square feet of output and Rs. 38856.50 for 175000 square feet of output.
Question: 1

The estimated cost per square feet of output is least for:

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When fixed costs are present, cost per unit typically decreases as production rises (economies of scale), until a point. Beyond that, rising variable costs may increase unit cost again. Always check ratios carefully.
Updated On: Aug 23, 2025
  • 75000 square feet output
  • 100000 square feet output
  • 125000 square feet output
  • 150000 square feet output
  • 175000 square feet output
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The Correct Option is D

Solution and Explanation

Step 1: Identify all cost components.
Mulchand Textiles has four types of costs: 1. Labour cost (given in table).
2. Material cost (given in table).
3. Electricity cost (geometric progression up to 150000 sq ft, then arithmetic progression beyond that).
4. Administrative cost = fixed Rs. 40000 at all levels.

Step 2: Recall electricity costs.
- At 25000 sq ft: 3800
- At 50000 sq ft: 5700
- Progression is geometric till 150000 sq ft. So ratio $r = \frac{5700}{3800} = 1.5$. Hence, electricity cost values are: \[ 25000 \Rightarrow 3800, \quad 50000 \Rightarrow 5700, \quad 75000 \Rightarrow 8550, \quad 100000 \Rightarrow 12825, \quad 125000 \Rightarrow 19237.5, \quad 150000 \Rightarrow 28856.25 \] Beyond 150000, arithmetic progression begins with a common difference: \[ 38856.5 - 28856.25 = 10000.25 \] So, \[ 175000 \Rightarrow 38856.5, \quad 200000 \Rightarrow 48856.75 \]

Step 3: Compute total costs.
At each output, \[ \text{Total cost} = \text{Labour cost} + \text{Material cost} + \text{Electricity cost} + 40000 \] For example: - At 25000 sq ft: \[ 21500 + 11050 + 3800 + 40000 = 76350 \] - At 50000 sq ft: \[ 41500 + 22000 + 5700 + 40000 = 109200 \] - At 75000 sq ft: \[ 60000 + 33000 + 8550 + 40000 = 141550 \] - At 100000 sq ft: \[ 78000 + 44000 + 12825 + 40000 = 174825 \] - At 125000 sq ft: \[ 95000 + 54750 + 19237.5 + 40000 = 208987.5 \] - At 150000 sq ft: \[ 111000 + 65700 + 28856.25 + 40000 = 245556.25 \] - At 175000 sq ft: \[ 133000 + 76650 + 38856.5 + 40000 = 288506.5 \] - At 200000 sq ft: \[ 160000 + 88000 + 48856.75 + 40000 = 336856.75 \]

Step 4: Calculate cost per square foot.
Divide each total cost by corresponding output: - $76350 / 25000 = 3.054$
- $109200 / 50000 = 2.184$
- $141550 / 75000 \approx 1.887$
- $174825 / 100000 = 1.748$
- $208987.5 / 125000 \approx 1.672$
- $245556.25 / 150000 \approx 1.637$
- $288506.5 / 175000 \approx 1.649$
- $336856.75 / 200000 \approx 1.684$

Step 5: Find the least value.
The smallest cost per square foot is at 150000 sq ft: \[ \approx 1.637 \, \text{Rs. per sq ft} \]

Final Answer: \[ \boxed{\text{D) 150000 square feet output}} \]
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Question: 2

The estimated material cost table for “Variable Cost Estimates of Mulchand Textiles” included (i) material spoilage cost and (ii) material usage cost. Mr. Sharma lost the table but remembered that the \emph{line graph shown} had monthly output (x-axis) and spoilage cost per sq. ft. (y-axis). From the given total material costs at each output level and reading the spoilage cost per sq. ft. from the graph, determine how the \emph{material usage cost per sq. ft. of output} varies with output. \begin{center} \includegraphics[width=0.7\textwidth]{03.jpeg} \end{center}

Show Hint

When solving cost decomposition problems, always separate fixed-per-unit costs (like spoilage per sq. ft.) and then subtract from total to find the residual usage cost. If the per-unit result is consistent across outputs, the trend is constant.
Updated On: Aug 23, 2025
  • Decreases up to 125000 sq. ft. and then increases monotonically.
  • Decreases up to 50000, remains constant between 50000 and 100000, decreases between 100000 and 125000, remains constant between 125000 and 175000 and finally increases between 175000 and 200000.
  • Remains constant for all levels of monthly output.
  • Increases up to 50000, remains constant between 50000 and 100000, increases between 100000 and 125000, remains constant between 125000 and 175000 and finally decreases between 175000 and 200000.
  • Increases up to 100000 and then decreases monotonically.
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The Correct Option is C

Solution and Explanation

Step 1: Define cost components.
At each output level \(Q\) (in sq. ft.), total material cost \(M\) is: \[ M = \text{Spoilage cost} + \text{Usage cost}. \] If spoilage cost per sq. ft. is \(s\) (from graph), then: \[ \text{Total spoilage cost} = s \times Q. \] Hence, \[ \text{Total usage cost} = M - (s \times Q). \]

Step 2: Calculate usage cost per sq. ft.
\[ \text{Usage cost per sq. ft.} = \frac{\text{Total usage cost}}{Q}. \] For example, for \(Q = 25000\): Material cost \(M = 11050\), spoilage cost per sq. ft. \(s = 0.042\). \[ \text{Total spoilage cost} = 25000 \times 0.042 = 1050. \] \[ \text{Usage cost} = 11050 - 1050 = 10000. \] \[ \text{Usage cost per sq. ft.} = \frac{10000}{25000} = 0.40. \]

Step 3: Verify across all outputs.
The same calculation repeated for 50000, 75000, 100000, 125000, 150000, 175000, and 200000 outputs gives usage cost per sq. ft. = 0.40 for all.

Step 4: Conclude.
Since the value remains \emph{constant} at 0.40 for all levels of output, the correct option is: \[ \boxed{\text{Remains constant for all levels of monthly output (Option C)}} \]
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Question: 3

Mr. Sharma found some unlabelled line-graphs. He remembers that the x-axis is monthly output (in square feet) and the y-axis is the \emph{electricity cost per square foot of output}. Using the given electricity cost (Rs.) for each output level, identify which of the five candidate graphs (A–E) correctly represents \(\text{electricity cost per sq. ft.}\) versus output.

Show Hint

When a question asks for a graph of “cost per unit” against output, first compute the per-unit values by dividing the total cost by the corresponding quantity at each point. Then match the \emph{trend} (fall/rise/plateau) and \emph{key levels} (like the minimum and maximum) to the candidate plots.
Updated On: Aug 23, 2025
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The Correct Option is B

Solution and Explanation

Step 1: Use the definition of the plotted quantity.
By the problem statement, the plotted ordinate is \[ \text{Electricity cost per sq. ft.} \;=\; \frac{\text{Total electricity cost (in ₹)}}{\text{Output (in sq. ft.)}}. \] Therefore, for each output level \(Q\), we compute \[ e(Q) \;=\; \frac{\text{Electricity cost at }Q}{Q}. \]

Step 2: Compute \(e(Q)\) for each given output.
From the table (costs read from the question data), the electricity cost values (in ₹) lead to the following per-unit costs: \[ \begin{array}{c|c|c} \text{Output }Q\;(\text{sq. ft.}) & \text{Electricity cost }(₹) & e(Q)=\frac{\text{cost}}{Q}\;(₹/\text{sq. ft.})
\hline 25{,}000 & 3800 & 0.15
50{,}000 & 5700 & 0.11
75{,}000 & 8550 & 0.11
100{,}000 & 12{,}825 & 0.13
125{,}000 & 19{,}237.5 & 0.15
150{,}000 & 28{,}856.25 & 0.19
175{,}000 & 38{,}586.5 & 0.22
200{,}000 & 48{,}856.75 & 0.24 \end{array} \]

Step 3: Infer the qualitative shape.
Reading the sequence of per-unit costs: \[ 0.15 \;\Rightarrow\; 0.11 \;\Rightarrow\; 0.11 \;\Rightarrow\; 0.13 \;\Rightarrow\; 0.15 \;\Rightarrow\; 0.19 \;\Rightarrow\; 0.22 \;\Rightarrow\; 0.24. \] Thus, the curve \emph{first decreases} from \(25{,}000\) to \(50{,}000\)–\(75{,}000\) sq. ft. (down to about \(0.11\)), and then \emph{increases steadily} up to \(200{,}000\) sq. ft. (reaching about \(0.24\)). The only candidate whose shape matches “dip to \(\approx 0.11\) early, then smooth rise to \(\approx 0.24\)” is

Option B. \[ \boxed{\text{Therefore, the correct diagram is }

B.} \]
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