ICANBusiness, Management and FinanceOrganisational Structure and Culture2023

Greenfield Properties Limited, a real estate company in Lagos, has a total annual payroll of ₦480,000,000. The company operates a flat organisational structure with only three management layers. Management is considering adding two additional layers to improve coordination. Research suggests that each additional management layer increases administrative overhead by 8% of total payroll. What will be the additional annual administrative cost of adding the two management layers?

A₦38,400,000
B₦76,800,000CORRECT
C₦96,000,000
D₦86,400,000
AI
Toaster Teacher
Why the answer is B, and why the others tempt you.
Each additional management layer increases administrative overhead by 8% of total payroll of ₦480,000,000. Cost per layer = 8% × ₦480,000,000 = ₦38,400,000. For two additional layers = 2 × ₦38,400,000 = ₦76,800,000. Therefore, the total additional annual administrative cost is ₦76,800,000. Option A represents only one layer, and Option C incorrectly applies a 20% rate.
Want this in Pidgin, Yoruba, Igbo or Hausa? Sign up free →

Practice more Business, Management and Finance questions

ICAN Business, Management and Finance has thousands more questions like this — with Worked answers on every one.

Start practicing free →See all Business, Management and Finance questions