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by orel » Sun Apr 19, 2009 6:31 am
The total cost of producing item X is equal to the sum of item X's fixed cost and variable cost. If the variable cost of producing X decreased by 5% in January, by what percent did the total cost of producing item X change in January?

(1) The fixed cost of producing item X increased by 13% in January.

(2) Before the changes in January, the fixed cost of producing item X was 5 times the variable cost of producing item X.
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by mals24 » Sun Apr 19, 2009 12:23 pm
Total Cost: T
Fixed Cost: F
Variable Cost: V

Given: T =F+V

V decreased by 5%.

St1: F increased by 13%

Before Jan: T =F+V
In Jan: T = 1.13F + 0.95V

This statement is insuff as we need more information regarding the relationship between F and V.

St2: F =5V

T =6V.
This statement gives us a relationship between F and V but no information regarding any changes in F after January. So we cannot find out the changes made in Total Cost.

Combining 1 & 2

We have information regarding how F and V are related plus changes in F in January.

Before January: T = F + V
T = 6V (since F =5V)

In January: T = 1.13 F + 0.95V
F = 5V

So, T = 6.6V.

We can easily find the % change in Total cost.

Answer is C
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