The following table shows the Income (in ₹ lakh) and percentage (%) profit of…

2023

The following table shows the Income (in ₹ lakh) and percentage (%) profit of a company over the six years from 2017 to 2022. Based on the data in the table:

Year-wise Income and Profit of a Company

Year

Income (in ₹ lakh)

Profit (%)

2017

120

7.5

2018

160

15

2019

130

22.5

2020

170

17.5

2021

190

20

2022

150

27.5

Approximately what was the average expenditure during the year from 2017 to 2022?

Answer: B. ₹ 130 lakhCONCEPTWhen profit percentage is calculated on expenditure, income equals expenditure multiplied by (1 + profit percentage/100). Therefore, expenditure equals…

  1. A.

    ₹ 110 lakh

  2. B.

    ₹ 130 lakh

  3. C.

    ₹ 120 lakh

  4. D.

    ₹ 140 lakh

Show answer & explanation

Correct answer: B

CONCEPT

When profit percentage is calculated on expenditure, income equals expenditure multiplied by (1 + profit percentage/100). Therefore, expenditure equals income divided by (1 + profit percentage/100).

For several years, calculate each year’s expenditure separately, add those expenditures, and divide the sum by the number of years to obtain the arithmetic mean.

APPLICATION

  1. 2017: Expenditure = 120/1.075 = ₹111.63 lakh (approximately).

  2. 2018: Expenditure = 160/1.15 = ₹139.13 lakh (approximately).

  3. 2019: Expenditure = 130/1.225 = ₹106.12 lakh (approximately).

  4. 2020: Expenditure = 170/1.175 = ₹144.68 lakh (approximately).

  5. 2021: Expenditure = 190/1.20 = ₹158.33 lakh (approximately).

  6. 2022: Expenditure = 150/1.275 = ₹117.65 lakh (approximately).

  7. Total expenditure = 111.63 + 139.13 + 106.12 + 144.68 + 158.33 + 117.65 = ₹777.54 lakh.

  8. Average expenditure = 777.54/6 = ₹129.59 lakh, which is approximately ₹130 lakh.

CROSS-CHECK

Multiplying the unrounded average by 6 gives ₹777.54 lakh, the same as the sum of the six year-wise expenditures. Thus, the required approximate value is ₹130 lakh.

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