Critical Reasoning

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

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

I think, the answer should be C

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

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!

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%.

How can the OA be D ?
to calculate profit margin we should know the Revenue figure as well as Expenditure .

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).

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