A pharmaceutical company received \(\$3\) million in royalties on the first \(\$20\) million in sales of the generic

This topic has expert replies
Legendary Member
Posts: 2898
Joined: 07 Sep 2017
Thanked: 6 times
Followed by:5 members

Timer

00:00

Your Answer

A

B

C

D

E

Global Stats

A pharmaceutical company received \(\$3\) million in royalties on the first \(\$20\) million in sales of the generic equivalent of one of its products and then \(\$9\) million in royalties on the next \(\$108\) million in sales. By approximately what percent did the ratio of royalties to sales decrease from the first \(\$20\) million in sales to the next \(\$108\) million in sales?

(A) \(8\%\)
(B) \(15\%\)
(C) \(45\%\)
(D) \(52\%\)
(E) \(56\%\)

Answer: C

Source: Official Guide

GMAT/MBA Expert

User avatar
GMAT Instructor
Posts: 16067
Joined: 08 Dec 2008
Location: Vancouver, BC
Thanked: 5254 times
Followed by:1268 members
GMAT Score:770
Vincen wrote:
Fri Jan 28, 2022 4:50 am
A pharmaceutical company received \(\$3\) million in royalties on the first \(\$20\) million in sales of the generic equivalent of one of its products and then \(\$9\) million in royalties on the next \(\$108\) million in sales. By approximately what percent did the ratio of royalties to sales decrease from the first \(\$20\) million in sales to the next \(\$108\) million in sales?

(A) \(8\%\)
(B) \(15\%\)
(C) \(45\%\)
(D) \(52\%\)
(E) \(56\%\)

Answer: C

Source: Official Guide
First $20 million: royalties/sales ratio = 3/20 = 36/240
Next $108 million: royalties/sales ratio = 9/108 = 1/12 = 20/240

Noticed that I rewrote both with the SAME DENOMINATOR.
So, now all we need to is determine the percent change from 36 to 20.
To do so, we could use some more lengthy calculations [e.g., 100(36-20)/36]
HOWEVER, notice that, if we start at 36, a 50% decrease would give us 18.
So going from 36 to 20, must be a decrease that's LESS THAN 50% (but also pretty close to 50%)
Only one answer choice works.

Answer: C

Cheers,
Brent
Brent Hanneson - Creator of GMATPrepNow.com
Image