P & L II

Profit and loss is one of the most significant topics for CAT and other management entrance exams.
Though appearance of questions from the topic in CAT has been sporadic, in other management entrance
exams, questions from this area have featured on a regular basis.

Key concepts discussed:

Cost price of an article is the price at which the article is bought.

Selling price of an article is the price at which the article is sold.
Marked price of an article is the lable or list price of the article.
Profit/Loss is the difference between the selling price and the cost price. If the difference is positive,
it is called profit; and if is negative, it is called loss.

Pr ofit / Loss
100
CP
Margin is the profit as a percentage of SP.
Discount is the reduction made on the marked price.
Mark-up is the difference between the list price and the cost price.
Pr ofit / Loss percentage =

Highlight: This session deals with an array of lengthy questions of moderate difficulty level. The session
highlights the importance of sound understanding of the fundamentals.

Session

P&L

The questions discussed in the session are given below along with their source.
Q1.

How many kgs of tea worth Rs. 25 per kg must be blended with 30 kgs of tea worth Rs. 30 per kg
so that by selling the blended variety at Rs. 30 per kg there should be a gain of 10%?
(a) 36 kgs
(b) 40 kgs
(c) 32 kgs
(d) 42 kgs
(SNAP 2009)

Q2.

The profits of Biscuits India Ltd soared by 32% in the year 2006 07 as compared to year
2005 06. By what percentage did Biscuits Indias Sales increase in 2006 07 compared to the
previous year? (Assume: Profit = Sales Expenses) Decide whether the information given in the
two statements is sufficient to solve the problem.
Statement (1): Expenses in 2006 07 were Rs 1,400 crores, as compared to Rs 1,220 crores in
2005 06
Statement (2): Sales in 2006 07 were Rs 4,300 crores
(a) Any one of the two statements (1) or (2) taken alone, is sufficient to answer the question.
(b) Each of the statement (1) or (2) taken alone, is sufficient to answer the question.
(c) Both statements, taken together, are sufficient to answer the question, but neither of them alone
is sufficient
(d) Both the statements together are insufficient to answer the question.
(SNAP 2007)

Q3.

A salesman sells two kinds of trousers: cotton and woollen. A pair of cotton trousers is sold at 30%
profit and a pair of woollen trousers is sold at 50% profit. The salesman has calculated that if he
sells 100% more woollen trousers than cotton trousers, his overall profit will be 45%. However he
ends up selling 50% more cotton trousers than woollen trousers. What will be his overall profit?
(a) 37.5%
(b) 40%
(c) 41%
(d) 42.33%
(e) None of the above
(XAT 2009)

Q4.

John, Mona and Gordon, three US based business partners, jointly invested in a business project to
2
of the profits
3
whereas John and Mona divide the remainder equally. It is estimated that the income of John will
increase by $60 million when the rate of profit rises from 4% to 7%. What is the capital of Mona?
(a) $2000 million
(b) $3000 million
(c) $5000 million
(d) $8000 million
(FMS 2009)

supply nuclear fuel to India. As per their share in the investment, Gordon will receive

Q5.

P&L

A space research company wants to sell its two products A and B. If the product A is sold at 20%
loss and the product B at 30% gain, the company will not lose anything. If the product A is sold at
15% loss and the product B at 15% gain, the company will lose Rs. 6 million in the deal. What is the
cost of product B?
(a) Rs. 140 million
(b) Rs. 120 million
(c) Rs. 100 million
(d) Rs. 80 million
(FMS 2009)

Session

Q6.

A small and medium enterprise imports two components A and B from Taiwan and China respectively
and assembles them with other components to for a toy. Component A contributes to 10% of
production cost. Component B contributes to 20% of the production cost. Usually the company
sells this toy at 20% above the production cost. Due to increase in the raw material and labour cost
in both the countries, component A became 20% costlier and component B became 40% costlier.
Owing to these reasons the company increased its selling price by 15%. Considering that cost of
other components does not change, what will be the profit percentage, if the toy is sold at the new
price?
(a) 15.5%
(b) 25.5%
(c) 35.5%
(d) 40%
(IIFT 2011-13)

Session

P&L