An Indian company, having its registered office at Gurugram, is engaged in manufacturing of consumer goods at Noida. The goods manufactured by the company are sold in Indian market and exported to Europe. Company produces five products namely ‘P’, ‘Q’, ‘R’, ‘S’ and ‘T’. Total production of the company for the financial year 2021-22 is 3,000 tonnes and the turnover of the company is ₹ 50 million. Analysis of the production and net revenue generation shows that production of product ‘P’ is 21% of the total production and 18% of the turnover is attributable to product ‘P’; production of ‘Q’ is 16% of the total production and 17% of the turnover is attributable to ‘Q’; ‘R’ accounts for 18% of the total production and 20% of the turnover; ‘S’ accounts for 20% of the total production and 25% of the turnover, and; ‘T’ accounts for 25% of total production and 20% of turnover.

How much loss is incurred to company, if the expenditure on production of ‘t’ was Rs. 20,000 per tonne?

The correct option is 5 million.

Let us break down the given data step-by-step to calculate the total loss incurred on the production of product ‘T’.

Step 1: Extract the given information for total production and turnover.

• Total production of the company = 3,000 tonnes
• Total turnover (revenue) of the company = ₹ 50 million = ₹ 50,000,000

Step 2: Calculate the total production quantity of product ‘T’.

Product ‘T’ accounts for 25% of the total production.

$\text{Production of T}=25\%\times 3,000\text{tonnes}$

$\text{Production of T}=\frac{25}{100}\times 3,000=750\text{tonnes}$

Step 3: Calculate the revenue (turnover) generated by product ‘T’.

Product ‘T’ accounts for 20% of the total turnover of ₹ 50 million.

$\text{Revenue from T}=20\%\times \text{₹}50\text{million}$

$\text{Revenue from T}=\frac{20}{100}\times 50,000,000=\text{₹}10,000,000\text{(or ₹ 10 million)}$

Step 4: Calculate the total expenditure incurred on the production of product ‘T’.

Given expenditure on production of ‘T’ = ₹ 20,000 per tonne.

$\text{Total Expenditure on T}=750\text{tonnes}\times \text{₹}20,000\text{per tonne}$

$\text{Total Expenditure on T}=\text{₹}15,000,000\text{(or ₹ 15 million)}$

Step 5: Calculate the loss incurred on product ‘T’.

$\text{Loss}=\text{Total Expenditure}-\text{Total Revenue}$

$\text{Loss}=\text{₹}15\text{million}-\text{₹}10\text{million}=\text{₹}5\text{million}$

Thus, the loss incurred by the company on product ‘T’ is 5 million.