profit ,cost and sell price?

Question

Hi,

i have a data set like this .
http://img411.imageshack.us/my.php?image=4wheeler3xf.jpg

Now, I am trying solve this question based upon the data set.

Q:
IF due to some innovation , the selling price of a clutch drops by 20%,what will be the new profit margin as a percentage of selling price , If the selling price is not altered ?

My approach :
Current price of clutch =0.3x0.2x200000=Rs 12000

after drop the price would be =.8x12000=Rs 9600

Now what i should do now ?

i dont know the cost price and hence i am stuck .
i need to know the cost price because profit depends upon cost price.

everything data given here as a sell price.....sohow do i solve this problem ?

Hi, thanks for your effort .

but the answer given is 11.2%

Answer 1

I'll make this a little simpler (hopefully). If fact, you don't need the calculations from above.

All other things remaining the same (which I would assume, since no other details are given), if the price of the clutch drops by 20%, this means that the overall cost of the transmission has dropped by 20% as well. The new overall cost of the transmission will then be 80% of the earlier cost.

New Cost of Transmission = (0.8)*(0.2) = 16% of selling cost

Since everything else is remaining constant (engine, chassis, misc.), that 4% drop in the price of the transmission has to go somewhere - to the profit margin (that's the whole point of technological innovations).

New Profit Margin (percentage) = 10% + 4% = 14% of selling price

New Profit Margin (in dollars) = (20,000)*(.14) = $2800