## A small business invests $9,900 in equipment to produce a product. Each unit of the product costs$0.65 to produce and

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### A small business invests $9,900 in equipment to produce a product. Each unit of the product costs$0.65 to produce and

by M7MBA » Sat Sep 11, 2021 2:10 pm

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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 Answer: D Source: Official Guide ### GMAT/MBA Expert GMAT Instructor Posts: 15886 Joined: 08 Dec 2008 Location: Vancouver, BC Thanked: 5254 times Followed by:1267 members GMAT Score:770 ### Re: A small business invests$9,900 in equipment to produce a product. Each unit of the product costs $0.65 to produce a by [email protected] » Sun Sep 12, 2021 8:08 am M7MBA wrote: Sat Sep 11, 2021 2:10 pm 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

Source: Official Guide
Let x = the number of units produced AND sold

TOTAL COST
If each unit of the product costs $0.65 to produce, then it costs 0.65x dollars to produce x units We must also add the$9,900 investment in equipment
So, TOTAL COST = 0.65x + 9900

TOTAL REVENUE
If each unit sells for \$1.20 to produce, then selling x units results in TOTAL SALES of 1.2x dollars

We want: TOTAL REVENUE = TOTAL COST
In other words: 1.2x = 0.65x + 9900
Subtract 0.65x from both sides: 0.55x = 9900
Solve: x = 9900/0.55

PRO TIP: We know that 9900/0.5 = 19,800
Since 0.55 is a bit bigger than 0.5, we know that 9900/0.55 = a little bit LESS THAN 19,800