Fixed cost & variable cost. Confusing answer?

[suyashps]

Here is that confusing question:

The total cost of producing item A is equal to the sum of item A's fixed cost and variable cost. If the variable cost of producing A decreased by 10% in last month, by what percent did the total cost of producing item A change in last month?

(1) The fixed cost of producing item A increased by 15% in last month.

(2) Before the changes in last month, the fixed cost of producing item A was 5 times the variable cost of producing item A.

This is a question similar to what I encountered in one of the MGMAT practice CAT. Changed variable name and numbers. Dont know if that violets any IP rights. Anyways, according to them the correct answer is C - both together.

I say B i.e. 2 is sufficient. Because to calculate total cost with information in (2) we can assume that fixed cost has NOT changed (it is called at FIXED COST after all!). The answer explanation says we cannot count on (2) because WE DON'T KNOW CHANGE IN THE FIXED COST. But why should we assume any change in fixed cost? Dont we ignore (1) while evaluating option (2) independently? I am confused

What should be the right answer?

[dmateer25]

You can't assume that the fixed costs didn't change.

This question is a classic example of when you should use the information from statement 1 to your advantage when looking at statement 2. Since you know that on the GMAT the 2 statement won't contradict each other.

If statement one says that the fixed costs changed then you can make a general assumption that the fixed costs changed.

Now when looking at statement 2 you only know that the variable costs changed, but you don't know about the fixed costs. (but from statement one we know the fixed costs changed so you can't assume that they stayed the same). Therefore, statement 2 is insufficient.

You need both statements together to solve this question.

[suyashps]

Since you know that on the GMAT the 2 statement won't contradict each other.

Wow, Never knew that!