Find all School-related info fast with the new School-Specific MBA Forum

 It is currently 28 Aug 2015, 05:34

### GMAT Club Daily Prep

#### Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

# Events & Promotions

###### Events & Promotions in June
Open Detailed Calendar

# A firm's annual revenue grows twice as fast as its costs. In

Author Message
TAGS:
Moderator
Joined: 25 Apr 2012
Posts: 734
Location: India
GPA: 3.21
Followers: 31

Kudos [?]: 459 [2] , given: 723

A firm's annual revenue grows twice as fast as its costs. In [#permalink]  27 Mar 2013, 07:15
2
KUDOS
6
This post was
BOOKMARKED
00:00

Difficulty:

95% (hard)

Question Stats:

47% (04:36) correct 53% (03:09) wrong based on 181 sessions
A firm's annual revenue grows twice as fast as its costs. In 2007 it operated at a $1000 loss, it broke even in 2008, and in 2009 its revenues were 44% higher than in 2007. If the firm's revenues and costs grew at a constant rate over this period, what was its profit in 2009? A. 700 B. 1000 C. 1300 D. 1600 E. 2000 I found this problem quite difficult to be solved under 2 mins. Will be really keen to know if there are any shortcuts to handle such Questions. Would you rate this problem a 700 + ?? [Reveal] Spoiler: OA _________________ “If you can't fly then run, if you can't run then walk, if you can't walk then crawl, but whatever you do you have to keep moving forward.” Senior Manager Joined: 17 Dec 2012 Posts: 395 Location: India Followers: 20 Kudos [?]: 269 [3] , given: 10 Re: A firm's annual revenue grows twice as fast as its costs. In [#permalink] 16 Aug 2013, 18:23 3 This post received KUDOS 1. Let the revenues and costs in 2007 be r1 and c1 respectively. We have r1-c1=-1000 2. Let revenues in 2008 be r2 and c2 respectively. We have r2-c2=0 3. Let revenues and costs in 2009 be r3 and c3 respectively. we have r3=1.44r1. 4. Since the growth rate of sales is constant, growth rate per year is 20%. growth rate of costs is half of that which is 10% 5. (2) can be written as 1.2 r1-1.1 c1=0 6. Solving for (1) and (5), we have c1=12000 andr1=11000 7. r3=1.44*11000= 15840 and c3=1.21*12000=14520 8. Therefore profit in 2009=15840-14520=1320 The answer should be$1320
_________________

Srinivasan Vaidyaraman
Sravna Test Prep
http://www.sravna.com

Classroom Courses in Chennai
Free Online Material

Current Student
Joined: 29 Jan 2013
Posts: 21
Location: United States
Concentration: Strategy
GMAT 1: 710 Q50 V36
GPA: 3.4
WE: Analyst (Consulting)
Followers: 0

Kudos [?]: 13 [1] , given: 1

Re: A firm's annual revenue grows twice as fast as its costs [#permalink]  27 Mar 2013, 11:48
1
KUDOS
1
This post was
BOOKMARKED
mridulparashar1 wrote:
A firm's annual revenue grows twice as fast as its costs. In 2007 it operated at a $1000 loss, it broke even in 2008, and in 2009 its revenues were 44% higher than in 2007. If the firm's revenues and costs grew at a constant rate over this period, what was its profit in 2009? A. 700 B. 1000 C. 1300 D. 1600 E. 2000 First solve for how much revenue is increasing each year: R2008 = R2007*(1+x) R2009 = R2007*(1+x)^2=1.44*R2007 (1+x)^2 = 1.44 1+x=1.2 x=0.2 aka revenue increases 20% each year and cost increases 10% annually Next solve for R2007 and C2007: R2007 = C2007 - 1000 1.2*R2007 - 1.1*C2007 = 0 1.2*[C2007 - 1000] - 1.1*C2007 = 0 0.1*C2007 = 1,200 C2007 = 12,000 R2007 = 11,000 Finally find 2009 profits: Profit2009 = 1.44*11,000 - 1.21*12,000 Profit2009 = 15,840 - 14,520 Profit2009 = 1320 Answer: C Senior Manager Joined: 10 Jul 2013 Posts: 343 Followers: 3 Kudos [?]: 200 [0], given: 102 Re: A firm's annual revenue grows twice as fast as its costs. In [#permalink] 16 Aug 2013, 16:36 2013gmat wrote: A firm's annual revenue grows twice as fast as its costs. In 2007 it operated at a$1000 loss, it broke even in 2008, and in 2009 its revenues were 44% higher than in 2007. If the firm's revenues and costs grew at a constant rate over this period, what was its profit in 2009?

A $700 B$1000
C $1300 D$1600
E $2000 can anyone explain above question ? thanks By strict definitions, revenue can not be negative. But in the corrupt world of finance, revenue is a number between positive infinity and negative infinity depending on how the upper management instruct the finance people how to lie on the spreadsheets in their submissions to the Securities and exchange commission. _________________ Asif vai..... Manager Joined: 21 Aug 2012 Posts: 150 Followers: 2 Kudos [?]: 42 [0], given: 41 Re: A firm's annual revenue grows twice as fast as its costs. In [#permalink] 17 Aug 2013, 01:13 1 This post was BOOKMARKED SravnaTestPrep wrote: 1. Let the revenues and costs in 2007 be r1 and c1 respectively. We have r1-c1=-1000 2. Let revenues in 2008 be r2 and c2 respectively. We have r2-c2=0 3. Let revenues and costs in 2009 be r3 and c3 respectively. we have r3=1.44r1. 4. Since the growth rate of sales is constant, growth rate per year is 20%. growth rate of costs is half of that which is 10% 5. (2) can be written as 1.2 r1-1.1 c1=0 6. Solving for (1) and (5), we have c1=12000 andr1=11000 7. r3=1.44*11000= 15840 and c3=1.21*12000=14520 8. Therefore profit in 2009=15840-14520=1320 The answer should be$1320

How did you deduce that "growth rate per year is 20%."????
_________________

MODULUS Concept ---> inequalities-158054.html#p1257636
HEXAGON Theory ---> hexagon-theory-tips-to-solve-any-heaxgon-question-158189.html#p1258308

Senior Manager
Joined: 17 Dec 2012
Posts: 395
Location: India
Followers: 20

Kudos [?]: 269 [0], given: 10

Re: A firm's annual revenue grows twice as fast as its costs. In [#permalink]  17 Aug 2013, 02:32
jaituteja wrote:
SravnaTestPrep wrote:
1. Let the revenues and costs in 2007 be r1 and c1 respectively. We have r1-c1=-1000
2. Let revenues in 2008 be r2 and c2 respectively. We have r2-c2=0
3. Let revenues and costs in 2009 be r3 and c3 respectively. we have r3=1.44r1.
4. Since the growth rate of sales is constant, growth rate per year is 20%. growth rate of costs is half of that which is 10%
5. (2) can be written as 1.2 r1-1.1 c1=0
6. Solving for (1) and (5), we have c1=12000 andr1=11000
7. r3=1.44*11000= 15840 and c3=1.21*12000=14520
8. Therefore profit in 2009=15840-14520=1320

The answer should be $1320 How did you deduce that "growth rate per year is 20%."???? The rate can be calculated from the formula (1+r/100) ^2 = 1.44 , which will give r=20 _________________ Srinivasan Vaidyaraman Sravna Test Prep http://www.sravna.com Classroom Courses in Chennai Free Online Material Manager Joined: 20 Jul 2012 Posts: 155 Location: India WE: Information Technology (Computer Software) Followers: 1 Kudos [?]: 10 [0], given: 421 A firm's annual revenue grows twice as fast as its costs. [#permalink] 13 Feb 2014, 08:06 A firm's annual revenue grows twice as fast as its costs. In 2007 it operated at a$1000 loss, it broke even in 2008, and in 2009 its revenues were 44% higher than in 2007. If the firm's revenues and costs grew at a constant rate over this period, what was its profit in 2009?
a)$700 b)$1000
c)$1300 d)$1600
e)$2000 Also whats the level of this question ? Math Expert Joined: 02 Sep 2009 Posts: 29100 Followers: 4722 Kudos [?]: 49623 [0], given: 7400 Re: A firm's annual revenue grows twice as fast as its costs. [#permalink] 13 Feb 2014, 09:26 Expert's post akankshasoneja wrote: A firm's annual revenue grows twice as fast as its costs. In 2007 it operated at a$1000 loss, it broke even in 2008, and in 2009 its revenues were 44% higher than in 2007. If the firm's revenues and costs grew at a constant rate over this period, what was its profit in 2009?
a)$700 b)$1000
c)$1300 d)$1600
e)$2000 Also whats the level of this question ? Merging similar topics. Please refer to the solutions above. As for the difficulty level, I'd say it's ~650-700. _________________ Manager Joined: 04 Jan 2014 Posts: 128 Followers: 1 Kudos [?]: 7 [0], given: 24 Re: A firm's annual revenue grows twice as fast as its costs. In [#permalink] 16 Apr 2014, 07:14 I am lost. Can't solve it. Moderator Joined: 20 Dec 2013 Posts: 190 Location: United States GMAT 1: 640 Q44 V34 GMAT 2: 710 Q48 V40 GMAT 3: 720 Q49 V40 GPA: 3.16 WE: Consulting (Consumer Products) Followers: 3 Kudos [?]: 46 [0], given: 71 Re: A firm's annual revenue grows twice as fast as its costs. In [#permalink] 17 Apr 2014, 21:26 Expert's post tough one for sure. 3rd year revenue going up by 44% = 1st year revenue * (12^2/10^2) so 2nd year revenue is 1st year revenue * (12/10) --> 1st year revenue + 1st year revenue (2/10) so growth rate of revenue is 20% and costs is 10% _________________ Senior Manager Joined: 07 Apr 2012 Posts: 464 Followers: 1 Kudos [?]: 27 [0], given: 58 Re: A firm's annual revenue grows twice as fast as its costs. In [#permalink] 17 Sep 2014, 13:29 SravnaTestPrep wrote: 1. Let the revenues and costs in 2007 be r1 and c1 respectively. We have r1-c1=-1000 2. Let revenues in 2008 be r2 and c2 respectively. We have r2-c2=0 3. Let revenues and costs in 2009 be r3 and c3 respectively. we have r3=1.44r1. 4. Since the growth rate of sales is constant, growth rate per year is 20%. growth rate of costs is half of that which is 10% 5. (2) can be written as 1.2 r1-1.1 c1=0 6. Solving for (1) and (5), we have c1=12000 andr1=11000 7. r3=1.44*11000= 15840 and c3=1.21*12000=14520 8. Therefore profit in 2009=15840-14520=1320 The answer should be$1320

Something is messing up my calculations.
I substituted the amount by which C and R go up with X.
This meant that at 2009 we needed to find out : R*x^4 - C*X^2.
Since X^4 = 1.44 -> X^2 = 1.2
And that's why I multiplied C by 1.2 and not 1.21.
Why is this wrong?
Veritas Prep GMAT Instructor
Joined: 16 Oct 2010
Posts: 5850
Location: Pune, India
Followers: 1478

Kudos [?]: 7931 [0], given: 190

Re: A firm's annual revenue grows twice as fast as its costs. In [#permalink]  17 Sep 2014, 21:15
Expert's post
ronr34 wrote:
SravnaTestPrep wrote:
1. Let the revenues and costs in 2007 be r1 and c1 respectively. We have r1-c1=-1000
2. Let revenues in 2008 be r2 and c2 respectively. We have r2-c2=0
3. Let revenues and costs in 2009 be r3 and c3 respectively. we have r3=1.44r1.
4. Since the growth rate of sales is constant, growth rate per year is 20%. growth rate of costs is half of that which is 10%
5. (2) can be written as 1.2 r1-1.1 c1=0
6. Solving for (1) and (5), we have c1=12000 andr1=11000
7. r3=1.44*11000= 15840 and c3=1.21*12000=14520
8. Therefore profit in 2009=15840-14520=1320

The answer should be $1320 Something is messing up my calculations. I substituted the amount by which C and R go up with X. This meant that at 2009 we needed to find out : R*x^4 - C*X^2. Since X^4 = 1.44 -> X^2 = 1.2 And that's why I multiplied C by 1.2 and not 1.21. Why is this wrong? C and R do not go up by the same rate X. You are given that revenue grows twice as fast as cost. So if rate of revenue growth is X, rate of cost growth is X/2. _________________ Karishma Veritas Prep | GMAT Instructor My Blog Get started with Veritas Prep GMAT On Demand for$199

Veritas Prep Reviews

Veritas Prep GMAT Instructor
Joined: 16 Oct 2010
Posts: 5850
Location: Pune, India
Followers: 1478

Kudos [?]: 7931 [0], given: 190

Re: A firm's annual revenue grows twice as fast as its costs. In [#permalink]  17 Sep 2014, 21:24
Expert's post
1
This post was
BOOKMARKED
WoundedTiger wrote:
A firm's annual revenue grows twice as fast as its costs. In 2007 it operated at a $1000 loss, it broke even in 2008, and in 2009 its revenues were 44% higher than in 2007. If the firm's revenues and costs grew at a constant rate over this period, what was its profit in 2009? A. 700 B. 1000 C. 1300 D. 1600 E. 2000 I found this problem quite difficult to be solved under 2 mins. Will be really keen to know if there are any shortcuts to handle such Questions. Would you rate this problem a 700 + ?? Revenues increased by 44% in 2 years. Rate of revenue increase per year is the same. So $$(1 + x)^2 = 1.44$$ $$x = 20%$$ So revenue increases by 20% per year and since cost increases at half the rate, cost increases by 10% every year. Say 2007 revenue is R and 2007 cost is C. We know C = R + 1000 ....(I) In 2008, they break even. So 1.1*C = 1.2R Substituting from (I), 1.1*(R + 1000) = 1.2R R = 11,000 C = 12,000 In 2009, Profit = (1.2)^2*R - (1.1)^2C = 1.44*11,000 - 1.21*12000 = 1320 _________________ Karishma Veritas Prep | GMAT Instructor My Blog Get started with Veritas Prep GMAT On Demand for$199

Veritas Prep Reviews

Re: A firm's annual revenue grows twice as fast as its costs. In   [#permalink] 17 Sep 2014, 21:24
Similar topics Replies Last post
Similar
Topics:
3 The graph on the left shows the annual revenue growth rate of Company 3 13 Jul 2015, 23:53
1 The graph on the left shows the annual revenue growth of Company X ove 6 30 Dec 2014, 06:41
2 Machine A produces 100 parts twice as fast as Machine B does 2 24 Feb 2014, 03:56
4 Firm A's revenues are described by the equation Ra = 17.12x 6 30 Jan 2011, 16:49
6 A certain investment grows at an annual interest rate of 8%, 10 18 Nov 2009, 20:41
Display posts from previous: Sort by