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The profit earned by selling a commodity is generally given

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The profit earned by selling a commodity is generally given

by AAPL » Mon Jul 23, 2018 5:42 am

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The profit earned by selling a commodity is generally given by the selling price of the commodity minus the cost of the commodity. Each year, both the price and the cost increase for commodity A. By what percentage will the profit on commodity A grow next year?

(1) Next year, the cost of the commodity to retailers will increase by 9%.
(2) Next year, the selling price of the commodity by retailers will increase by 10%.

The OA is E.

Is there a strategic approach to this question? Can anyone help? Thanks!
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by Jay@ManhattanReview » Mon Jul 23, 2018 11:15 pm

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Your Answer

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B

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E

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AAPL wrote:The profit earned by selling a commodity is generally given by the selling price of the commodity minus the cost of the commodity. Each year, both the price and the cost increase for commodity A. By what percentage will the profit on commodity A grow next year?

(1) Next year, the cost of the commodity to retailers will increase by 9%.
(2) Next year, the selling price of the commodity by retailers will increase by 10%.

The OA is E.

Is there a strategic approach to this question? Can anyone help? Thanks!
Say the selling price = x and the cost = y

Thus, Profit = x - y

To find out: Percentage increase in profit next year, if both the price and the cost increase

Let's take each statement one by one.

(1) Next year, the cost of the commodity to retailers will increase by 9%.

No information about the increase in selling price. Insufficient.

(2) Next year, the selling price of the commodity by retailers will increase by 10%.

No information about the increase in cost price. Insufficient.

(1) and (2) together

Profit next year = 110% of x - 109% of y = 1.1x - 1.09y

Increase in profit = (1.1x - 1.09y) - (x - y) = 0.1x - 0.09y

Percentage increase in profit = [(0.1x - 0.09y)/(x - y)]*100%

Can't compute the unique value. Insufficient.

The correct answer: E

Hope this helps!

-Jay
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