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by klaud » Thu Mar 08, 2012 6:47 am
A small business invests $9,900 in equipment to produce a product. Each unit of the product costs $0.65 to produce and is sold for $1.20. How many units of the product must be sold before the revenue received equals the total expense of production, including the initial investment in equipment?

A. 12,000
B. 14,500
C. 15,230
D. 18,000
E. 20,000
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by Brent@GMATPrepNow » Thu Mar 08, 2012 7:41 am
klaud wrote:A small business invests $9,900 in equipment to produce a product. Each unit of the product costs $0.65 to produce and is sold for $1.20. How many units of the product must be sold before the revenue received equals the total expense of production, including the initial investment in equipment?

A. 12,000
B. 14,500
C. 15,230
D. 18,000
E. 20,000
Let's begin by writing a "word equation"
We want: revenue received = total expense of production

Let x = the number of units produced and sold.

Revenue received = 1.2x

Total expenses = initial investment + $0.65 per unit
= 9900 + 0.65x

So, we get the equation: 1.2x = 9900 + 0.65x

When we solve this for x, we get x=18000

So the answer is D

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Brent
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by klaud » Thu Mar 08, 2012 8:30 am
I solved this problem in this way:

1,20-0,65= 0,55

the difference between cost and revenue of each product MUST cover the fixed costs.

9,900:0,55=18,000
Last edited by klaud on Thu Mar 08, 2012 8:40 am, edited 2 times in total.
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by Brent@GMATPrepNow » Thu Mar 08, 2012 8:34 am
klaud wrote:I solved this problem in this way:

1,20-0,65= 0,55
9,900:0,55=18,000
I think our solutions are identical, except I may have explained a few more pieces :-)

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Brent
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