CAT Quantitative Ability Questions | CAT Percentage, Profit & Loss questions
Comprehension
Directions for questions: Read the information given below and answer the questions that follow :
The following graph represents the variable cost of widgets as a function of quantity produced. The cost of production has two components, variable cost — which is given in the graph, and fixed cost — which is Rs 800 for the first shift in which 30 widgets can be produced and if more production is desired then a second shift is started which can produce an additional 30 widgets.
The fixed cost of the second shift is Rs 1200.
Average cost is defined as the total cost total number of the widgets
Marginal cost is defined as change in total cost change in number of widgets produced.
Explanatory Answer
Method of solving this CAT Quantitative Ability Question from Percentage, Profit & Loss question
(c) The maximum profit can not be attained in case of 40 and 60 widgets as it would require to run the second shift which is costier then the first. Further the average cost will be less for 25 widgets cost, as the variable cost increases parabolically with number of widgets.