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100 points for $49 worth of Veritas practice GMATs FREE VERITAS PRACTICE GMAT EXAMS Earn 10 Points Per Post Earn 10 Points Per Thanks Earn 10 Points Per Upvote ## Plz explain with OA, as I couldn't figure out both! tagged by: ##### This topic has 8 member replies ## Plz explain with OA, as I couldn't figure out both! Company WXYZ manufactures and sells only four products: widgets, xylophones, yo-yos and zippers. For the past four years, the company has operated profitably. During that time, it has incurred thirty per cent of its costs manufacturing and distributing xylophones. During the same four years, sales of widgets, yo-yos and zippers have accounted for sixty per cent of the company's revenue. Which of the following is most strongly supported by the paragraph above? A. Zippers are more expensive to manufacture than xylophones. B. Xylophones are the most profitable products produced by WXYZ. C. Revenues from the sales of yo-yos exceed the costs of producing them. D. The company's profit margin on xylophones exceeds twenty-five per cent. E. The revenue of Company WXYZ has not increased in the last four years. Source : GMATClub Legendary Member Joined 15 Apr 2011 Posted: 1085 messages Followed by: 21 members Upvotes: 158 i'm not sure, but think it's d since company operates profitably, the margin of break-even (0.4 Sales -0.3 Expenses) will return 0.1 which is 25% of total Sales; it must be 25%+ to be profitable enterprise _________________ Success doesn't come overnight! Senior | Next Rank: 100 Posts Joined 29 Nov 2009 Posted: 54 messages Upvotes: 4 Test Date: Not Decided Target GMAT Score: 750 GMAT Score: N.A I think, the answer should be C Legendary Member Joined 17 May 2011 Posted: 1448 messages Followed by: 53 members Upvotes: 375 Hi, Let C be the total costs incurred. X accounts for 0.3C and WYZ account for 0.7C Let S be the total revenue. X accounts for 0.4S and WYZ account for 0.6S Given that the company is always profitable. So, S>C Consider the profit margin of X. It is (0.4S - 0.3C) Profit margin of company is S-C So, Fraction is (0.4S - 0.3C)/(S-C) = [0.1S + 0.3(S-C)]/(S-C) = 0.3+ (0.1S)/(S-C) > 30% Hence, D _________________ Cheers! Things are not what they appear to be... nor are they otherwise Last edited by Frankenstein on Tue Jul 26, 2011 4:50 am; edited 2 times in total Legendary Member Joined 26 Jul 2011 Posted: 2789 messages Followed by: 43 members Upvotes: 206 Target GMAT Score: 700+ GMAT Score: 640 IMO : B cost of xylo : 30 % (manufacturing cost) --- Given cost of others : 70 % (manufacturing cost) revenue from others : 60 % (Actual revenue) --- Given revenue from xylo : 40 % (Actual revenue) xylo takes only 30 % of costs and accounts to 40 % of the revenue, hence B! Legendary Member Joined 17 May 2011 Posted: 1448 messages Followed by: 53 members Upvotes: 375 GmatKiss wrote: IMO : B cost of xylo : 30 % (manufacturing cost) --- Given cost of others : 70 % (manufacturing cost) revenue from others : 60 % (Actual revenue) --- Given revenue from xylo : 40 % (Actual revenue) xylo takes only 30 % of costs and accounts to 40 % of the revenue, hence B! Hi, Consider: Product---W----X----Y----Z COST(100)-10--30---30---30 REVENUE--500-400---30---70 (1000) PROFIT---490-370----0---40 (900) W is more profitable than X. So, A,B,C are false. Well, coming to my previous post Profit share of X is (0.4S - 0.3C)/(S-C) = [0.4(S-C)+0.1C]/(S-C) = (0.4)+[0.1C/(S-C)], which is in fact > 40%. _________________ Cheers! Things are not what they appear to be... nor are they otherwise Legendary Member Joined 15 Jan 2010 Posted: 2330 messages Followed by: 26 members Upvotes: 56 How can the OA be D ? to calculate profit margin we should know the Revenue figure as well as Expenditure . _________________ I Seek Explanations Not Answers Legendary Member Joined 17 May 2011 Posted: 1448 messages Followed by: 53 members Upvotes: 375 mundasingh123 wrote: How can the OA be D ? to calculate profit margin we should know the Revenue figure as well as Expenditure . Hi, We are not calculating absolute profits. We are calculating profit share from Xylophones of the total profit of the company, and even this cannot be a definite figure. We can only find the range of it. We are actually considering Profits = Revenue - (manufacturing costs + distribution costs). _________________ Cheers! Things are not what they appear to be... nor are they otherwise Legendary Member Joined 15 Jan 2010 Posted: 2330 messages Followed by: 26 members Upvotes: 56 Frankenstein wrote: mundasingh123 wrote: How can the OA be D ? to calculate profit margin we should know the Revenue figure as well as Expenditure . Hi, We are not calculating absolute profits. We are calculating profit share from Xylophones of the total profit of the company, and even this cannot be a definite figure. We can only find the range of it. We are actually considering Profits = Revenue - (manufacturing costs + distribution costs). Yes i know i am pointing out the likelihood that D is the OA as pointed out by people in the beginning of this thread _________________ I Seek Explanations Not Answers • 5-Day Free Trial 5-day free, full-access trial TTP Quant Available with Beat the GMAT members only code • 1 Hour Free BEAT THE GMAT EXCLUSIVE Available with Beat the GMAT members only code • Magoosh Study with Magoosh GMAT prep Available with Beat the GMAT members only code • 5 Day FREE Trial Study Smarter, Not Harder Available with Beat the GMAT members only code • Free Trial & Practice Exam BEAT THE GMAT EXCLUSIVE Available with Beat the GMAT members only code • Award-winning private GMAT tutoring Register now and save up to$200

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