Question Details

The budget of a factory is distributed among raw materials, wages, and maintenance in the ratio 4:3:3. During a year, the cost of raw materials rises by 12%, wages by 8%, and maintenance falls by 10%. What is the overall percentage change in the total budget?

Options

A

0.4% decrease

B

4.2% increase

C

3.2% increase

D

2.0% decrease

Show Answer

Correct Answer :

Option B

4.2% increase

Solution :

The correct option is 4.2% increase.

Step 1: Understand the initial ratio and assign values to the components of the budget.

The total budget of the factory is distributed among three components:
- Raw materials
- Wages
- Maintenance

The initial ratio of allocation is given as 4:3:3.

To simplify calculations, let the initial costs be proportional to these ratio values by multiplying them by 100:

Cost of Raw Materials = 4 × 100 = 400

Cost of Wages = 3 × 100 = 300

Cost of Maintenance = 3 × 100 = 300

Step 2: Calculate the total initial budget.

Total Initial Budget = 400 + 300 + 300 = 1000

Step 3: Calculate the change in cost for each component.

1. Raw materials rise by 12%:

Increase in Raw Materials = 12 % of 400 = 12 100 × 400 = 48

2. Wages rise by 8%:

Increase in Wages = 8 % of 300 = 8 100 × 300 = 24

3. Maintenance falls by 10%:

Decrease in Maintenance = 10 % of 300 = 10 100 × 300 = 30

Step 4: Determine the net change in the total budget.

Net Change = + 48 + 24 - 30 = 42

Since the net result is positive (+42), it represents an overall increase in the budget.

Step 5: Calculate the percentage change in the total budget.

Overall Percentage Change = Net Change Total Initial Budget × 100

Overall Percentage Change = 42 1000 × 100 = 4.2 %

Therefore, the overall percentage change in the total budget is a 4.2% increase.

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