## Gross profit

##### This topic has expert replies
Master | Next Rank: 500 Posts
Posts: 163
Joined: 13 Jan 2015
Thanked: 2 times

### Gross profit

by didieravoaka » Wed Apr 13, 2016 1:50 pm
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 I got C as the answer. Is this correct? Thanks. GMAT Instructor Posts: 15537 Joined: 25 May 2010 Location: New York, NY Thanked: 13060 times Followed by:1902 members GMAT Score:790 by GMATGuruNY » Wed Apr 13, 2016 2:10 pm didieravoaka 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
The following cases satisfy both statements.

Case 1:
Revenues for X = $10 million, expenses for X =$5 million, yielding a profit for X of $5 million. Revenues for Y =$16 million, expenses for Y = $6 million, yielding a profit for Y of$10 million.
In this case, Y earns a greater profit than X.

Case 2:
Revenues for X = $60 million, expenses for X =$50 million, yielding a profit for X of $10 million. Revenues for Y =$66 million, expenses for Y = $60 million, yielding a profit for Y of$6 million.
In this case, X earns a greater profit than Y.

Since in the first case Y>X, but in the second case X>Y, the two statements combined are INSUFFICIENT.

Private tutor exclusively for the GMAT and GRE, with over 20 years of experience.
Followed here and elsewhere by over 1900 test-takers.
I have worked with students based in the US, Australia, Taiwan, China, Tajikistan, Kuwait, Saudi Arabia -- a long list of countries.
My students have been admitted to HBS, CBS, Tuck, Yale, Stern, Fuqua -- a long list of top programs.

As a tutor, I don't simply teach you how I would approach problems.
I unlock the best way for YOU to solve problems.

Student Review #1
Student Review #2
Student Review #3

Master | Next Rank: 500 Posts
Posts: 410
Joined: 13 Mar 2015
Location: Worldwide
Thanked: 120 times
Followed by:8 members
GMAT Score:770
by OptimusPrep » Wed Apr 13, 2016 8:09 pm
didieravoaka 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 I got C as the answer. Is this correct? Thanks. Required: Which of X and Y earned greater profit Profit = Revenue - Expenses Statement 1: last year the expenses of Company X were 5/6 of the expenses of company Y This statements just tells us about about the expenses. Insufficient Statement 2: Last year the revenues of Company X were$6 million less than the revenues of Company Y
This statement tells us just about the revenues but nothing about the expenses.
Insufficient

Combining both the statements:
From statement 1 - Assume the expenses of company X = 5E,
expenses of company Y = 6E
From statement 2 - Assume the revenue of company X = R
Revenues of company Y = R + 6

Profit of X = R - 5E
Profit of Y = R + 6 - 6E
Since we do not know the relation between R and E, we cannot calculate the relation between the profits.
Insufficient

Correct Option: E

GMAT Instructor
Posts: 2630
Joined: 12 Sep 2012
Location: East Bay all the way
Thanked: 625 times
Followed by:118 members
GMAT Score:780
by [email protected] » Fri Apr 15, 2016 1:09 pm
Let's say X's expenses are a and its revenues are b. For Y, let's make those c and d.

S1:: a = (5/6)c
S2:: b = d - 6,000,000

The gross profits would be revenues - expenses, so our question is now

Is b - a > d - c ?

Is (d - 6,000,000) - (5/6)c > d - c ?

Is (1/6)c > 6,000,000 ?

Is c > 36,000,000 ?

But we don't know the value of c (Company Y's expenses), so we can't answer.

• Page 1 of 1