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OG 13 - DS - Q26

by ruwan_ss » Mon Jun 09, 2014 7:31 pm
The profit from the sale of a certain appliance increases, though not proportionally, with the number of units sold. did the profit exceed $4 million on sales of 380,000 units?

1) The profit exceeded $2 million on sales of 200,000 units.
2) The profit exceeded $5 million on sales of 350,000 units.

Can someone please help me understand why statement 1 is not sufficient?

This is my thinking. The question is saying that the profits will not grow proportionally and also says that the profits will increase with increased sales. Using statement 1 we can conclude that profits are increasing - $2,000,000 / 200,000 = $10 per unit. I know it says not proportionally, but from 200,000 to 380,000 clearly more units needs to be sold, why can't we assume that it will have a higher profit margin than $10 per unit, concluding that profits will surpass $ 4 million with 380k units sold?

Sorry I'm not seeing something here. Any advice is greatly appreciated. Thanks.
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by Brent@GMATPrepNow » Mon Jun 09, 2014 9:08 pm
ruwan_ss wrote:The profit from the sale of a certain appliance increases, though not proportionally, with the number of units sold. Did the profit exceed $4 million on sales of 380,000 units?

1) The profit exceeded $2 million on sales of 200,000 units.
2) The profit exceeded $5 million on sales of 350,000 units.

Target question: Did the profit exceed $4 million on sales of 380,000 units?

Given: The profit from the sale of a certain appliance increases, though not proportionally, with the number of units sold.
IMPORTANT: This means that we CANNOT make any "good" assumptions about the profits from sales other those presented in statements 1 and 2. All we know FOR CERTAIN is that increased unit sales means increased profits. That's it.

Statement 1: The profit exceeded $2 million on sales of 200,000 units.
The given information (about profits NOT being proportional) means that the ONLY conclusion we can draw here is that the profit from the sale of 380,000 units must be greater than $2 million. That's it.
So, the profit from the sale of 380,000 units could be greater than $4 million or less than $4 million.
Since we cannot answer the target question with certainty, statement 1 is NOT SUFFICIENT

Statement 2: The profit exceeded $5 million on sales of 350,000 units.
From the given information, we can conclude (with certainty) that the profit from the sale of 380,000 units must be greater than $5 million.
This means that the the profit from the sale of 380,000 units DEFINITELY exceeded $4 million
Since we can answer the target question with certainty, statement 2 is SUFFICIENT

Answer = B

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Brent
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by Brent@GMATPrepNow » Mon Jun 09, 2014 9:12 pm
ruwan_ss wrote:The profit from the sale of a certain appliance increases, though not proportionally, with the number of units sold. did the profit exceed $4 million on sales of 380,000 units?

1) The profit exceeded $2 million on sales of 200,000 units.
2) The profit exceeded $5 million on sales of 350,000 units.

Can someone please help me understand why statement 1 is not sufficient?

This is my thinking. The question is saying that the profits will not grow proportionally and also says that the profits will increase with increased sales. Using statement 1 we can conclude that profits are increasing - $2,000,000 / 200,000 = $10 per unit. I know it says not proportionally, but from 200,000 to 380,000 clearly more units needs to be sold, why can't we assume that it will have a higher profit margin than $10 per unit, concluding that profits will surpass $ 4 million with 380k units sold?

Sorry I'm not seeing something here. Any advice is greatly appreciated. Thanks.
The given information does not tell us that the per-unit profit increases with the increase in units sold.
It just says that overall profits increase.
So, it could be the case that the sale of 200,000 units yields $2 million in profit, and the sale of 1,000,000 units yields $2.1 million in profit. This scenario conforms to the given conditions.

Cheers,
Brent
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by ruwan_ss » Tue Jun 10, 2014 3:58 pm
Brent@GMATPrepNow wrote:
ruwan_ss wrote:The profit from the sale of a certain appliance increases, though not proportionally, with the number of units sold. did the profit exceed $4 million on sales of 380,000 units?

1) The profit exceeded $2 million on sales of 200,000 units.
2) The profit exceeded $5 million on sales of 350,000 units.

Can someone please help me understand why statement 1 is not sufficient?

This is my thinking. The question is saying that the profits will not grow proportionally and also says that the profits will increase with increased sales. Using statement 1 we can conclude that profits are increasing - $2,000,000 / 200,000 = $10 per unit. I know it says not proportionally, but from 200,000 to 380,000 clearly more units needs to be sold, why can't we assume that it will have a higher profit margin than $10 per unit, concluding that profits will surpass $ 4 million with 380k units sold?

Sorry I'm not seeing something here. Any advice is greatly appreciated. Thanks.
The given information does not tell us that the per-unit profit increases with the increase in units sold.
It just says that overall profits increase.
So, it could be the case that the sale of 200,000 units yields $2 million in profit, and the sale of 1,000,000 units yields $2.1 million in profit. This scenario conforms to the given conditions.

Cheers,
Brent
Thank you Brent. So, profit from the sale of a certain appliance increases with the number of units sold pretty much means that more you sell, more overall profits you will realize?

It does not mean that, more you sell more the profit margin will be.

Second question, isn't it intuitive that more you sell more profits you will realize? given that you sell for a higher price than what you bought it for.
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by ruwan_ss » Tue Jun 10, 2014 4:00 pm
Brent@GMATPrepNow wrote:
ruwan_ss wrote:The profit from the sale of a certain appliance increases, though not proportionally, with the number of units sold. did the profit exceed $4 million on sales of 380,000 units?

1) The profit exceeded $2 million on sales of 200,000 units.
2) The profit exceeded $5 million on sales of 350,000 units.

Can someone please help me understand why statement 1 is not sufficient?

This is my thinking. The question is saying that the profits will not grow proportionally and also says that the profits will increase with increased sales. Using statement 1 we can conclude that profits are increasing - $2,000,000 / 200,000 = $10 per unit. I know it says not proportionally, but from 200,000 to 380,000 clearly more units needs to be sold, why can't we assume that it will have a higher profit margin than $10 per unit, concluding that profits will surpass $ 4 million with 380k units sold?

Sorry I'm not seeing something here. Any advice is greatly appreciated. Thanks.
The given information does not tell us that the per-unit profit increases with the increase in units sold.
It just says that overall profits increase.
So, it could be the case that the sale of 200,000 units yields $2 million in profit, and the sale of 1,000,000 units yields $2.1 million in profit. This scenario conforms to the given conditions.

Cheers,
Brent
Thank you Brent. So, profit from the sale of a certain appliance increases with the number of units sold pretty much means that more you sell, more overall profits you will realize?

It does not mean that, more you sell more the profit margin will be.

Second question, isn't it intuitive that more you sell more profits you will realize? given that you sell for a higher price than what you bought it for.
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by Brent@GMATPrepNow » Tue Jun 10, 2014 5:41 pm
ruwan_ss wrote: Thank you Brent. So, profit from the sale of a certain appliance increases with the number of units sold pretty much means that more you sell, more overall profits you will realize?
That's correct.
ruwan_ss wrote: It does not mean that, more you sell more the profit margin will be.
That's correct.

ruwan_ss wrote: Second question, isn't it intuitive that more you sell more profits you will realize? given that you sell for a higher price than what you bought it for.
Kind of, but not necessarily.
For example, let's say your factory makes widgets and can produce UP TO 200,000 units.
However, if you want to make more widgets, you'll need to build a second factory.
In this case, selling 200,100 widgets will result in reduced profits.

Cheers,
Brent
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by ruwan_ss » Tue Jun 10, 2014 8:08 pm
thank you Brent. it's clear now.
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