If ingredient cost rises but price is not changed in a food enterprise, what is the risk?
Answer and explanation
Correct answer: Profit margin may decrease
When ingredient cost increases, the cost of producing each food item rises. If the selling price remains unchanged, the difference between selling price and cost becomes smaller, so the profit margin may decrease. Food safety, customer complaints, and shelf life do not automatically change because the price is unchanged. Exam tip: Remember that profit margin depends on the gap between selling price and total cost.
Frequently asked questions
What is the correct answer to this question?
Profit margin may decrease
Why is this the correct answer?
When ingredient cost increases, the cost of producing each food item rises. If the selling price remains unchanged, the difference between selling price and cost becomes smaller, so the profit margin may decrease. Food safety, customer complaints, and shelf life do not automatically change because the price is unchanged. Exam tip: Remember that profit margin depends on the gap between selling price and total cost.
Which subject and chapter does this question cover?
This is a Class 11 Home Science question. Chapter: Work, Livelihood and Career. Topic: Traditional occupations in India - Indian cuisine.
