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Question:

In 1997-98 the total cost of raw materials is estimated as 50% of sales of that year. The turn over of Gross fixed assets, defined as the ratio of sales to Gross fixed assets, in 1997-98 is, approximately

Explanation:

Total cost of raw material = 0.5 × Sales

∵ Import of raw material = 20.2 × Total cost of raw material

∴ Import of raw material = 10.1 × Sales

∵ Import of Capital Goods = 17.6 × Gross fixed assets (GFA)

∵ Imports = Raw Materials + Capital Goods

∴ Imports = (10.1 × Sales) + (17.6 × GFA)

∵ Imports = 14.2 × Sales

∴ 14.2 × Sales = (10.1 × Sales) + (17.6 × GFA)

$∴ \frac{S a l e s}{G F A} = \frac{17.6}{4.1} = 4.3$

Hence, option (b).

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