If material wastage is high but sales are good in a food enterprise, why can profit be low?
Answer and explanation
Correct answer: Wastage of raw materials increases costs and reduces the profit margin
Profit equals sales revenue minus total cost. Material wastage can raise spending on raw materials, fuel, labour, and disposal without creating saleable output. Therefore, even with good sales, higher total cost can reduce the profit margin. Option B is incorrect because higher sales do not make production costs zero. Exam tip: while calculating profit, consider food cost and wastage cost along with sales.
Frequently asked questions
What is the correct answer to this question?
Wastage of raw materials increases costs and reduces the profit margin
Why is this the correct answer?
Profit equals sales revenue minus total cost. Material wastage can raise spending on raw materials, fuel, labour, and disposal without creating saleable output. Therefore, even with good sales, higher total cost can reduce the profit margin. Option B is incorrect because higher sales do not make production costs zero. Exam tip: while calculating profit, consider food cost and wastage cost along with sales.
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.
