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CAT 1996 | Question: 140

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2 2 votes

A watch dealer incurs an expense of Rs $150$ for producing every watch. He also incurs an additional expenditure of Rs. $30,000$, which is independent of the number of watches produced. If he is able to sell a watch during the season, he sells it for Rs. $250$. If he fails to do so, he has to sell each watch for Rs. $100$.

If he produces $1500$ watches, what is the number of watches that he must sell during the season in order to break even, given that he is able to sell all the watches produced?

  1. $500$ 
  2. $700$ 
  3. $800$ 
  4. $1,000$

1 Answer

1 1 vote

Production cost of 1500 watches = Rs 255000

the number of watches that he must sell during the season = x 

So number of watches sold after the season = 1500 - x

Therefore Amount Realized on the sale of 1500 watches or SP = x * 250 + (1500 - x) * 100

From this statement ( the number of watches that he must sell during the season in order to break even, given that he is able to sell all the watches produced.)

Break even is achieved if selling price = production cost 

Therefore, x * 250 + (1500 - x) * 100 = 255000

                  x = 700

Option B is the Correct Answer

 

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