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Register now and save up to $200 Available with Beat the GMAT members only code ## Profit and loss tagged by: Brent@GMATPrepNow This topic has 5 expert replies and 0 member replies ### Top Member vaibhav101 Junior | Next Rank: 30 Posts Joined 01 May 2017 Posted: 27 messages Thanked: 2 times #### Profit and loss Mon Jun 05, 2017 5:04 am Elapsed Time: 00:00 • Lap #[LAPCOUNT] ([LAPTIME]) The manufacturer of a certain item can sell all he can produce at the selling price of$60 each. It costs him $40 in materials and labour to produce each item and he has overhead expenses of$3000 per week in order to operate the plant. The minimum number of units that he should produce and sell in order to make profit of at least $1000 per week, is A 200 B 250 C 300 D 400 E 500 Need free GMAT or MBA advice from an expert? Register for Beat The GMAT now and post your question in these forums! ### GMAT/MBA Expert Brent@GMATPrepNow GMAT Instructor Joined 08 Dec 2008 Posted: 10764 messages Followed by: 1213 members Thanked: 5154 times GMAT Score: 770 Mon Jun 05, 2017 5:12 am vaibhav101 wrote: The manufacturer of a certain item can sell all he can produce at the selling price of$60 each. It costs him $40 in materials and labour to produce each item and he has overhead expenses of$3000 per week in order to operate the plant. The minimum number of units that he should produce and sell in order to make profit of at least $1000 per week, is A 200 B 250 C 300 D 400 E 500 Let x = the number of units produced in 1 week. It costs him$40 in materials and labour to produce each item and he has overhead expenses of $3000 per week in order to operate the plant. TOTAL EXPENSES for 1 week = 40x + 3000 The manufacturer of a certain item can sell all he can produce at the selling price of$60 each.
So, the manufacturer will sell x units at $60 apiece TOTAL REVENUE for 1 week = 60x PROFIT = 60x - ( 40x + 3000) = 20x - 3000 The minimum number of units that he should produce and sell in order to make profit of at least$1000 per week, is
We can write the equation: 20x - 3000 = 1000
Add 3000 to both sides: 20x = 4000
Solve: x = 200

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Rich.C@EMPOWERgmat.com Elite Legendary Member
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Mon Jun 05, 2017 10:22 am
Hi vaibhav101,

This question can be solved by TESTing THE ANSWERS.

We're told that each unit costs $40 to produce and will be sold for$60. In addition, the production plant costs $3,000 per week to operate. We're asked for the minimum number of units that must be produced in one week to net at least a$1,000 profit.

Let's TEST Answer B: 250 units

250 units would net $20/profit each... (250)($20) = $5,000 After subtracting the$3,000 needed to run the plant, we have...
$5,000 -$3,000 = $2,000 This is higher than what we were asked for, so 250 units is clearly too many to produce the minimum profit we were after. There's only one answer left that 'fits' Final Answer: A GMAT assassins aren't born, they're made, Rich _________________ Contact Rich at Rich.C@empowergmat.com ### GMAT/MBA Expert Jay@ManhattanReview GMAT Instructor Joined 22 Aug 2016 Posted: 703 messages Followed by: 17 members Thanked: 335 times Mon Jun 05, 2017 9:15 pm vaibhav101 wrote: The manufacturer of a certain item can sell all he can produce at the selling price of$60 each. It costs him $40 in materials and labour to produce each item and he has overhead expenses of$3000 per week in order to operate the plant. The minimum number of units that he should produce and sell in order to make profit of at least $1000 per week, is A 200 B 250 C 300 D 400 E 500 We see that at$60 selling price and $40 cost price, there is a margin of$20 per unit. If there are x units to be produced, they must bring in the total margin (20x) that can at least cover overhead expense ($3000) and profit ($1000).

Thus, 20x ≥ (3000 + 1000) => 20x ≥ 4000 => x ≥ 200 units.

Hope this helps!

-Jay
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Matt@VeritasPrep GMAT Instructor
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Mon Jun 05, 2017 11:39 pm
Costs: $40 per item +$3000
Profits: $60 per item If our guy sells x items and makes$1000, we know that

Profits - Costs = $1000 60x - (40x + 3000) = 1000 20x - 3000 = 1000 20x = 4000 x = 200 Thanked by: vaibhav101 Enroll in a Veritas Prep GMAT class completely for FREE. Wondering if a GMAT course is right for you? Attend the first class session of an actual GMAT course, either in-person or live online, and see for yourself why so many students choose to work with Veritas Prep. Find a class now! ### GMAT/MBA Expert Jeff@TargetTestPrep GMAT Instructor Joined 09 Apr 2015 Posted: 323 messages Followed by: 6 members Thanked: 31 times Sat Jun 10, 2017 7:41 am vaibhav101 wrote: The manufacturer of a certain item can sell all he can produce at the selling price of$60 each. It costs him $40 in materials and labour to produce each item and he has overhead expenses of$3000 per week in order to operate the plant. The minimum number of units that he should produce and sell in order to make profit of at least $1000 per week, is A 200 B 250 C 300 D 400 E 500 We can let x = the number of items sold. Thus, the revenue from selling x items is 60x. The cost of producing x items is 40x and there is a fixed cost of$3,000. Thus, the total cost is 40x + 3000.

Since revenue - cost = profit and we want the profit to be at least \$1,000, we can now determine the minimum value of x using the following inequality:

60x - (40x + 3,000) ≥ 1000

60x - 40x - 3,000 ≥ 1000

20x - 3,000 ≥ 1000

20x ≥ 4000

x ≥ 200

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