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PS Question

by Param800 » Sat Dec 22, 2012 4:21 pm
Q. A local farmer grows wheat on land he rents for a fixed cost of 200000$ per year. The variable cost of growing one bushel of wheat is 10$. In a certain year, the farmer grows and sells 50000 bushels of wheat and makes a profit of 150000$, after paying fixed cost to rent. If every bushel sold for the same price, what was the selling price in dollars of a bushel of wheat?

3
7
11
13
17

Can someone please explain this question to me ? The [spoiler]OA = E[/spoiler]

This is what I am trying to do -

SP = CP + P = ( 200K + 500 K) + ( 150 K + 200 K)

So, basically my question is that do we add 200 K in the Profit or not ? After knowing the answer, I know we don't , but I don't understand why.

My understanding was that as the person is making a profit of 150000$ after paying fixed cost to rent which is 200K, so the total profit he earned should be ( 200 K + 150 K ). Please explain this to me. Thank You.

P.S. Source of this question is from Kaplan GMAT Premier
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by puneetkhurana2000 » Sat Dec 22, 2012 6:31 pm
SP = CP + Profit

50,000*x(Total SP of Bushel) = 200,000(Fixed Cost) + 50,000*10(Total CP of Bushel) + 150,000(Profit).

Solving we get x = 17.

Answer E.
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by GMATGuruNY » Sat Dec 22, 2012 7:30 pm
Param800 wrote:Q. A local farmer grows wheat on land he rents for a fixed cost of 200000$ per year. The variable cost of growing one bushel of wheat is 10$. In a certain year, the farmer grows and sells 50000 bushels of wheat and makes a profit of 150000$, after paying fixed cost to rent. If every bushel sold for the same price, what was the selling price in dollars of a bushel of wheat?

3
7
11
13
17

Can someone please explain this question to me ? The [spoiler]OA = E[/spoiler]
ALWAYS LOOK AT THE ANSWER CHOICES.

Profit for bushel = (total profit)/(total bushels sold) = 150,000/50,000 = $3.
If the only expense were the variable cost per bushel -- $10 -- the selling price would be $13.
But the land adds $200,000 to the total cost.
Thus, the selling price of each bushel must be GREATER than $13.

The correct answer is E.
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