The total cost of producing item X is equal to the sum of item X's overhead cost and production cost. If the production cost of producing X decreased by 5% in January, by what percent did the total cost of producing item X change in that same month?
(1) The overhead cost of producing item X increased by 13% in January.
(2) Before the changes in January, the overhead cost of producing item X was 5 times the production cost of producing item X.
OAC
Item X
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To determine the percent change in the total cost, we need to know the RATIO between the new cost and the original cost.The total cost of producing item X is equal to the sum of item X's overhead cost and production cost. If the production cost of producing X decreased by 5% in January, by what percent did the total cost of producing item X change in that same month?
(1) The overhead cost of producing item X increased by 13% in January.
(2) Before the changes in January, the overhead cost of producing item X was 5 times the production cost of producing item X.
Question rephrased: What is the value of (new cost)/(original cost)?
Statement 1: The overhead cost of producing item X increased by 13% in January.
Test one case that also satisfies statement 2 and one case that DOESN'T also satisfy statement 2.
Case 1:
Original overhead cost = 100, original production cost = 20, original total cost = 100+20 = 120.
13% higher overhead cost = 113, 5% lower production cost = 19, new total cost = 113+19 = 132.
Resulting ratio:
(new cost)/(original cost) = 132/120 = 11/10.
Case 2:
Original overhead cost = 100, original production cost = 40, original total cost = 100+40 = 140.
13% higher overhead cost = 113, 5% lower production cost = 38, new total cost = 113+38 = 151.
Resulting ratio:
(new cost)/(original cost) = 151/140.
Since different ratios are possible, INSUFFICIENT.
Statement 2: Before the changes in January, the overhead cost of producing item X was 5 times the production cost of producing item X.
No information about how the overhead cost changes in January.
INSUFFICIENT.
Statements combined:
Case 1 satisfies both statements.
Test one more case that satisfies both statements.
Case 3:
Original overhead cost = 200, original production cost = 40, original total cost = 200+40 = 240.
13% higher overhead cost = 226, 5% lower production cost = 38, new total cost = 226+38 = 264.
Resulting ratio:
(new cost)/(original cost) = 264/240 = 11/10.
Since Case 1 and Case 3 yield the same ratio, the two statements combined indicate that (new cost)/(original cost) = 11/10.
SUFFICIENT.
The correct answer is C.
Last edited by GMATGuruNY on Fri Mar 04, 2016 3:45 pm, edited 1 time in total.
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We could also just say that
o + p = x
where o and p are the costs in December. We know that January has something*o + .95*p, so let's work from there.
S1:: We've now got 1.13o + .95p. But we can't say how much greater this is than o + p, as there's no way of removing both variables; NOT SUFFICIENT.
S2:: o = 5p; same idea, this doesn't tell us the increase in o, so it's NOT SUFFICIENT.
Together:: December was o + p, or 5p + p. January is 1.13*(5p) + .95*p, or 6.6p. So we've gone from 6p to 6.6p, a 10% increase - SUFFICIENT!
(Note that this is 66/60, not 61/60, but that doesn't matter for the purposes of this problem.)
o + p = x
where o and p are the costs in December. We know that January has something*o + .95*p, so let's work from there.
S1:: We've now got 1.13o + .95p. But we can't say how much greater this is than o + p, as there's no way of removing both variables; NOT SUFFICIENT.
S2:: o = 5p; same idea, this doesn't tell us the increase in o, so it's NOT SUFFICIENT.
Together:: December was o + p, or 5p + p. January is 1.13*(5p) + .95*p, or 6.6p. So we've gone from 6p to 6.6p, a 10% increase - SUFFICIENT!
(Note that this is 66/60, not 61/60, but that doesn't matter for the purposes of this problem.)