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Cars

by Oneva » Thu Jan 13, 2011 8:57 pm
At the beginning of last year, Tony's Auto dealership had 200 cars available for sale on the lot. The cars were acquired by Tony's at an average cost of $10,000 each. During last year, Tony's acquired an additional 50 cars. What was the total acquisition cost on the lot at Tony's at the end of the year?

1.) The average cost per car of all cars acquired by Tony's last year was $12,500.

2.) The total revenue from cars sold last year was $1,050,000.

The answer is E

But I thought it would be C.

If you take statement 1 you can find the total cost of all the cars. Then with statement 2 you can subtract revenue from the total acquisition cost. That would then leave you with the total acquisition cost at the end of the year. But the answer Veritas gives is E because we still don't know which cars Tony's sold last year and cannot calculate the acquisition cost. But that doesn't make sense to me because the question is asking for the total; and we can find the total acquisition cost. Could someone please clarify?
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by DeepthiRajan » Thu Jan 13, 2011 11:25 pm
Lets look at each statement in isolation:

(I)--gives the average cost of all the new cars i.e 50 acquired during the year. Doesn't give any idea of how many cars were sold by the end of the year. NOT SUFF

(II)---gives the total revenue of sold cars without specifying how many of each i.e 200 and 50 cars were sold. Also doesn't give any idea about the price of the 50 cars acquired during the year.

Combining the two still doesn't give any idea as there is no data about the split between the 200 cars that were present at the begining of the year and the 50 new cars, both of which will be at different cost prices. Thus the total acquisistion prices cannot be determined.

Hence E.

HTH
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by aleph777 » Fri Jan 14, 2011 6:23 am
I'd love a bit more clarification on this one. I thought the answer was A, and here was my reasoning:

Question: What's the total acquisition cost? We know he bought 200 cars at an average of $10,000 each, thus the cost would be $2000000. And we know he later bought 50 additional cars for a cost of x.

Statement 1: The average cost per car in total was $12500. So I thought you could get total acquisition cost by multiplying average x total number of cars for a total sum of 12500(250) = 3125000.

Statement 2: The revenue is insufficient because it tells us nothing about the cost of the additional 50 cars, nor do we know what percentage he marked up each car.

Why doesn't statement 1 work?
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by Oneva » Sat Jan 15, 2011 9:06 am
I'm a little confused. Isn't the total acquisition cost the same as the total cost of the cars still on the lot?

with statement one and statement two you can calculate the total cost of the cars. Could you please clarify?
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by DeepthiRajan » Sat Jan 15, 2011 7:46 pm
The total acquisition cost is indeed the total cost of the cars but the question is about the acquisition cost of the cars still in the lot at the end of the year. With no information on how many cars i.e 200 and 50 were sold during the year, its impossible to find the Cost at the end of the year
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by Oneva » Sun Jan 16, 2011 2:20 pm
Sorry Deep, I am still a little bit confused.

With statement two we have the revenue at the end of the year, then we can use that to calculate the total cost at the end of the year, which is the same as the total acquisition cost at the end of the year. Do we really need to know the numbers from the 200 cars and the 50 cars as long as we have that total cost at the end of the year?

Sorry for not replying to your question aleph, but the reason statement 1 alone wouldn't be sufficient is because the statement doesn't take into account the sales of last year. so it would be impossible to know the total cost of goods at the end of the year.
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by fitzgerald23 » Mon Jan 17, 2011 11:54 am
Oneva wrote:Sorry Deep, I am still a little bit confused.

With statement two we have the revenue at the end of the year, then we can use that to calculate the total cost at the end of the year, which is the same as the total acquisition cost at the end of the year. Do we really need to know the numbers from the 200 cars and the 50 cars as long as we have that total cost at the end of the year?

Sorry for not replying to your question aleph, but the reason statement 1 alone wouldn't be sufficient is because the statement doesn't take into account the sales of last year. so it would be impossible to know the total cost of goods at the end of the year.
In order to know the total acquisition cost on the lot you will need to know how many cars are sold. For example lets just say he had 200 cars that cost 10K each at the start and never bought more cars. That would make his acquisition cost equal to (200)(10,000). Now how do you get the cost at the end of the year? (200-cars sold)(10,000).

The revenue information does not give you that cars sold number. Maybe they just sold 1 car for 1.05M. Then the cost remaining on the lot is (199)(10,000). Maybe they sold 10 cars. If thats the case its (190)(10,000). You have to remember that selling price and acquisition costs are two totally different numbers.
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by ankur.agrawal » Tue Jan 18, 2011 1:51 am
aleph777 wrote:I'd love a bit more clarification on this one. I thought the answer was A, and here was my reasoning:

Question: What's the total acquisition cost? We know he bought 200 cars at an average of $10,000 each, thus the cost would be $2000000. And we know he later bought 50 additional cars for a cost of x.

Statement 1: The average cost per car in total was $12500. So I thought you could get total acquisition cost by multiplying average x total number of cars for a total sum of 12500(250) = 3125000.

Statement 2: The revenue is insufficient because it tells us nothing about the cost of the additional 50 cars, nor do we know what percentage he marked up each car.

Why doesn't statement 1 work?
I thought the same . I think this is correct.
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by ankurmit » Tue Jan 18, 2011 3:42 am
IMO A

Total aquisition cost = 200*10000 + 50* cost of average cost of aquiring 50 cars( say Y)

Given stem 1:

The average cost per car of all cars acquired by Tony's last year was $12,500.

12500 = (200*10000 + 50 *Y) / 250

We can definitely find out Y and hence stem 1 is sufficient.
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by fitzgerald23 » Tue Jan 18, 2011 8:08 am
ankurmit wrote:IMO A

Total aquisition cost = 200*10000 + 50* cost of average cost of aquiring 50 cars( say Y)

Given stem 1:

The average cost per car of all cars acquired by Tony's last year was $12,500.

12500 = (200*10000 + 50 *Y) / 250

We can definitely find out Y and hence stem 1 is sufficient.
But I dont believe the question is asking you how much he spent on cars during the year. The question is asking:

What was the total acquisition cost on the lot at Tony's at the end of the year?

What that is saying is that on December 31st, 2010 there were x amount of cars that had not been sold and are still remaining on Tonys lot. How much did it cost Tony to purchase those cars that he did not sell during the year. You can not answer that from the information given because no information in the statements allows you to determine cars sold during the year or remaining at the end of the year.
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by chendawg » Tue Feb 08, 2011 2:11 pm
what's the source?
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by banibhusan » Sat Feb 12, 2011 11:09 am
The last statement does sound a bit ambiguous. One can easily misinterpret it as "the total acquisition cost of the 250 cars", in which case the 1st statement is sufficient. But it actually asks us to find out the total acquisition cost of the cars yet to be sold at the end of the year, in which case the answer would be E.
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by Rezinka » Thu Mar 03, 2011 2:36 am
I still don't understand :
Assuming that the question is asking for the total acquisition cost of the cars yet to be sold at the end of the year.
Even then we have :
Total cost incurred on the acquisition = 250*12500 = 3025000
Total revenue = 1050000
Therefore, cost on acquisition = 3025000 - 1050000
= 1975000
So, C should be the answer.
Why do we require the number of the different kinds of cars still available?
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by djiddish98 » Tue Apr 19, 2011 10:10 am
This question is poorly worded, since you must assume that Tony's auto dealership sells cars (which removes them from the lot) and doesn't just acquire them for kicks or for parts.

They need to mention that Tony also sells cars in the statement, as opposed to introducing some vague revenue figure in statement II.

I don't think the fact that this is an auto dealership allows you to assume that he's selling vehicles off the lot.
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by force5 » Tue Apr 19, 2011 10:37 am
At the beginning of last year, Tony's Auto dealership had 200 cars available for sale on the lot. The cars were acquired by Tony's at an average cost of $10,000 each. During last year, Tony's acquired an additional 50 cars. What was the total acquisition cost on the lot at Tony's at the end of the year?

1.) The average cost per car of all cars acquired by Tony's last year was $12,500.

2.) The total revenue from cars sold last year was $1,050,000.
The question seems correct to me. However the wording might be a little confusing. It clearly states beginning of the year, during the year and end of the year..... that what the catch was.

But we are still not sure how many total cars were there. Hence we cannot calculate total acquisition cost. hence E. don't worry GMAT questions will be much clearer.
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