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There are five levels {P, Q, R, S, T} in a linear supply chain before a product reaches customers, as shown in the figure.At each of the five levels, the price of the product is increased by 25%. If the product is produced at level P at the cost of Rs. 120 per unit, what is the price paid (in rupees) by the customers?

A.
187.5
B.
234.38
C.
292.96
D.
366.21

Solution:

Given:liner supply chain systemThe Cost price of P = 120 Rs per unit The price of the product is increased by 25% at each level so the value will increase by 125% at every stage The price at level Q:? \((1+25/100)\) × cost price of P? 1.25x120? 150 Rs per unit The price at level R:? 1.25 × price at level Q? 1.25 × 150? 187.5 Rs per unitThe price at level S:? 1.25 × price at level R? 1.25 × 187.5? 234.345 Rs per unitThe price at level T:? 1.25 × price at level S? 1.25 × 234.345? 292.93 Rs per unitThe price paid by the customers:? 1.25 × price at level T? 1.25 × 292.93? 366.21 Rs per unit We can solve the above problem by using a simple trick:The price paid by customers = price at level P × \(\left ( \frac{100\ +\ percentage\ increase}{100} \right )^5\) (? 5 stages so power is 5 )? 120 × \(\left ( \frac{100\ +\ 25}{100} \right )^5\)? 366.21 Rs per unit

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