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If the amount spent on Hire Purchase agreements was increased by 20% across all five
departments what would be the effect on the overall spend (if the overall spend was $2,000,000
originally)?
Correct answer: B
Explanation
If the total amount spent = 2,000,000
Then the amount spent on hire purchase agreement is (75/500 ) x 2,000,000 = 300,000 Note: 75% is
the total percentage of higher purchase agreement in all five departments 500% is the sum of all
the percentages of the department.
If we increase higher purchase by 20% across all departments, the new percentage of higher purchase
becomes 175%.
New amount spent on higher purchase becomes (175/500) x 200,000 = 700,000
This is 40,000 higher
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