A newly-opened retail store made $400 profit on the initial

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swerve: Legendary Member; Posts: 2499; Joined: Sun Oct 29, 2017 2:04 pm; Followed by:6 members

A newly-opened retail store made $400 profit on the initial

by swerve » Tue Apr 09, 2019 10:17 am

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A newly-opened retail store made $400 profit on the initial expenditure of $25000, and then made $1200 profit on the next $80000 expenditure. By approximately what percent did the ratio of profit to expenditure change from the first $25000 expenditure to the next $80000 expenditure?

A. 6.67% decrease
B. 6.25% decrease
C. 0
D. 6.25% increase
E. 6.67% increase

The OA is B

Source: e-GMAT

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Source: Beat The GMAT — Problem Solving | Tue Apr 09, 2019 10:17 am

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[email protected]: Elite Legendary Member; Posts: 10392; Joined: Sun Jun 23, 2013 6:38 pm; Location: Palo Alto, CA; Thanked: 2867 times; Followed by:511 members; GMAT Score:800

by [email protected] » Thu Apr 11, 2019 9:50 am

Hi All,

We're told that a newly-opened retail store made $400 profit on the initial expenditure of $25000, and then made $1200 profit on the next $80000 expenditure. We're asked for the approximate percentage change in the ratio of profit to expenditure change from the first $25000 expenditure to the next $80000 expenditure. This question requires the use of the Percentage Change Formula - and you will likely find it helpful to rewrite the given values as individual percentages (instead of fractions).

Percentage Change = (New - Old)/(Old) = Difference/Original

The ratio of the original profit-to-expenditure = 400/25000 = 4/250
The ratio of the second profit-to-expenditure = 1200/80000 = 12/800

We can rewrite those fractions as percents...
4/250 = 16/1000 = 1.6%
12/800 = 1.5/100 = 1.5%

Thus, there was clearly a decrease (from 1.6% to 1.5%). Using the Percentage Change Formula, we have...

(1.6 - 1.5)/(1.6) = 0.1/1.6 = 1/16 = a 6 1/4% decrease.

Final Answer: B

GMAT assassins aren't born, they're made,
Rich

Contact Rich at [email protected]

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Scott@TargetTestPrep: GMAT Instructor; Posts: 8086; Joined: Sat Apr 25, 2015 10:56 am; Location: Los Angeles, CA; Thanked: 43 times; Followed by:29 members

by Scott@TargetTestPrep » Sat Apr 13, 2019 5:45 pm

swerve wrote:A newly-opened retail store made $400 profit on the initial expenditure of $25000, and then made $1200 profit on the next $80000 expenditure. By approximately what percent did the ratio of profit to expenditure change from the first $25000 expenditure to the next $80000 expenditure?

A. 6.67% decrease
B. 6.25% decrease
C. 0
D. 6.25% increase
E. 6.67% increase

The OA is B

Source: e-GMAT

The first profit-to-expenditure ratio is:

400/25000 = 4/250 = 2/125 = 16/1000

The second profit-to-expenditure ratio is:

1200/80,000 = 12/800 = 3/200 = 15/1000

Thus, the percent change is:

(15/1000 - 16/1000)/(16/1000) x 100

-1/1000 x 1000/16 x 100 = -1/16 x 100 = -6.25 percent

The negative coefficient is indicative of a decrease; thus, the change was a 6.25 percent decrease.

Answer: B

Scott Woodbury-Stewart
Founder and CEO
[email protected]