GATE 2020 CH – Question 25
A phenol plant produces 100 metric tons/year at full capacity. Selling price is INR 200/kg, production cost INR 50/kg, and annual fixed charges, overhead and general expenses total INR 30,00,000. Tax is 18% of gross profit. All product is sold. Find annual net profit in INR.
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Correct answer: (C) 98,40,000
Explanation
Annual production is 100000 kg. Contribution after variable production costs is $(200-50)(100000)=15000000$ INR. Subtract annual fixed and other charges of 3000000 to get gross profit 12000000 INR. Applying 18% tax leaves $12000000(0.82)=9840000$ INR = 98,40,000, option C.