The earnings and expenditure of a small company are recorded across four months as shown in the given chart. If the company spends as much as it earns in the month of May as well, by how much would its average savings change from its value in the first four months?

$2500

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$200

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$2000

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$1250

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Solution

The correct option is D $1250
$S a v i n g s = E a r n i n g s - E x p e n d i t u r e$

Calculating the savings of the company in each month, we get:

$J a n u a r y :$

$E a r n i n g s = 15 \times $ 1000 = $ 15000$
$E x p e n d i t u r e = 5 \times $ 1000 = $ 5000$
$⟹ S a v i n g s = $ 15000 - $ 5000 = $ 10000$

$F e b r u a r y :$

$E a r n i n g s = 25 \times $ 1000 = $ 25000$
$E x p e n d i t u r e = 20 \times $ 1000 = $ 20000$
$⟹ S a v i n g s = $ 25000 - $ 20000 = $ 5000$

$M a r c h :$

$E a r n i n g s = 35 \times $ 1000 = $ 35000$
$E x p e n d i t u r e = 25 \times $ 1000 = $ 25000$
$⟹ S a v i n g s = $ 35000 - $ 25000 = $ 10000$

$A p r i l :$

$E a r n i n g s = 20 \times $ 1000 = $ 20000$
$E x p e n d i t u r e = 20 \times $ 1000 = $ 20000$
$⟹ S a v i n g s = $ 20000 - $ 20000 = $ 0$

$F o u r - m o n t h a v e r a g e o f t h e s a v i n g s = \frac{$ 10000 + $ 5000 + $ 10000 + $ 0}{4} = \frac{$ 25000}{4} = $ 6250$

Now, if the company spends as much as it earns in the fifth month (i.e., May), we get the savings for May as:

$S a v i n g s = E a r n i n g s - E x p e n d i t u r e = $ 0$

Taking the five-month average of the company's savings, including that in the month of May, we get:

$= \frac{$ 10000 + $ 5000 + $ 10000 + $ 0 + $ 0}{5} = \frac{$ 25000}{5} = $ 5000$

Now, calculating the difference between the four-month average and the five-month average of the company's savings, we get:

$D i f f e r e n c e = $ 6250 - $ 5000 = $ 1250$

Hence, after the month of May, the average savingsof the company would decrease by $1250.

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