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Which of company X and company Y earned the greater profits?

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Which of company X and company Y earned the greater profits?

by bhumika.k.shah » Wed Feb 03, 2010 10:06 am
Which of company X and company Y earned the greater gross profits last year ?


Statement I - last year the expenses of Company X were 5/6 of the expenses of company Y

Statement II - Last year the revenues of Company X were $6 million less than the revenues of Company Y


Whats the missing info that makes the correct answer E instead of the very obvious C ??
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by thephoenix » Wed Feb 03, 2010 10:10 am
we dnt know any thing about earnings of bth the companies

revenue=lexp-earningl
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by ajith » Wed Feb 03, 2010 10:14 am
bhumika.k.shah wrote:Which of company X and company Y earned the greater gross profits last year ?


Statement I - last year the expenses of Company X were 5/6 of the expenses of company Y

Statement II - Last year the revenues of Company X were $6 million less than the revenues of Company Y


Whats the missing info that makes the correct answer E instead of the very obvious C ??
Profits = Revenue - Expenses

Statement 1 says expenses are less for company X (5/6 of company Y) - Insuff - no info about revenues
Statement 2 says revenues of company X is less than revenues of company y - Insuff - no info about expenses

Combining

Profits of company X- Profits of Company Y = (Revenues of X- Revenues of Y) - (Expenses of X- Expenses of Y)
= - 6million - (-1/6 Expenses of Y)
= -6 million + 1/6 Expenses of Y

now we do not know how much is the expenses of Y hence insufficient
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by pleurazn » Fri Oct 14, 2011 6:20 pm
I am still confused. Shouldn't you be able to just use some random figure for expenses of Y.

For example

Scenario 1:
Expenses Revenues
x $500 $500

y $600 $506

Scenario 2:
Expenses Revenues
x $500 $100

y $600 $106

Scenario 3:
Expenses Revenues Gross Profit
x $-500 $100 $600
y $-600 $106 $706


Can you not just do it that way? Then no matter how much Y has in revenues it will never make a bigger gross profit than x? I used 500 and 600 to be consistent with Statement (1)

NEVERMIND LOOK AT SCENARIO 3. Aha. If company X and Y had negative expenses then company Y would have a great gross-profit. Tricky GMAT... when would you ever think of having negative expenses.

Does this make sense or does making the expenses negative somehow make statement (1) untrue?
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by sl750 » Fri Oct 14, 2011 11:38 pm
bhumika.k.shah wrote:Which of company X and company Y earned the greater gross profits last year ?


Statement I - last year the expenses of Company X were 5/6 of the expenses of company Y

Statement II - Last year the revenues of Company X were $6 million less than the revenues of Company Y


Whats the missing info that makes the correct answer E instead of the very obvious C ??
This is a bit tricky

From statement 1 and 2 , we have

P(x) = R(y) - 5/6*C(y) -6
P(y) = R(y) - C(y). At first sight it might seem for whatever value of C(y), P(y) would be greater. But for C(y) = 36, we get P(x)=P(y). Hence E is the answer
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