Difficulty: Medium
Correct Answer: Rs. 420
Explanation:
Introduction:
This is a classic average cost problem. Increasing the headcount changes both the total and per-head costs. We set up two equations: one for the new total expense and another linking new per-head cost to the old per-head cost minus Re 1, then solve for the original total expense.
Given Data / Assumptions:
Concept / Approach:
Let original total expense be E. Then original per-head = E / 35. New total = E + 42, so new per-head = (E + 42) / 42. Given (E + 42) / 42 = (E / 35) − 1. Solve for E.
Step-by-Step Solution:
Verification / Alternative check:
Original per-head = 420 / 35 = 12. New total = 462; new per-head = 462 / 42 = 11, exactly Re 1 less.
Why Other Options Are Wrong:
432, 442, 40, and 410 fail the per-head check when substituted back into the relationships.
Common Pitfalls:
Subtracting Rs 42 from per-head instead of adjusting totals; mixing up “increase” and “decrease”.
Final Answer:
Rs. 420
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