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# A firm's financial data for 2004-2006 is given in this chart (all figu

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Manager
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A firm's financial data for 2004-2006 is given in this chart (all figu [#permalink]  23 Mar 2011, 19:16
00:00

Difficulty:

75% (hard)

Question Stats:

55% (04:06) correct 45% (03:35) wrong based on 22 sessions
Attachment:

Untitled.png [ 3.82 KiB | Viewed 376 times ]
A firm's financial data for 2004-2006 is given in this chart (all figures in 1000s of $). If the firm's average annual profits over the period 2004-2012 are$300,000, and its average costs and revenues change by an equal percentage between the two periods, what is the ratio of its revenue in 2004-2006 to its revenue for the years 2007-2012?

A 1/6
B 2/9
C 1/4
D 2/5
E 1/2
[Reveal] Spoiler: OA

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Manager
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Kudos [?]: 107 [2] , given: 12

Re: A firm's financial data for 2004-2006 is given in this chart (all figu [#permalink]  24 Mar 2011, 04:43
2
KUDOS
In the problem we have 2 periods 2004-2006 (3 years) and 2007-2012 (6 years).
For the first period the average revenue is (1100+700+300)/3=700
The average costs is (400+900+500)/3=600
So, the average profit is 700-600=100
Let assume that both revenue and costs increased in the second period by x percents. Then new average revenue for 2007-2012 is 700(1+x/100), new average costs is 600(1+x/100).
To calculate average profit for the whole total period 2004-2012 we need to sum all revenues, subtract all costs and divide by 9.
Total revenues=3*700+6*700(1+x/100)
Total costs=3*600+6*600(1+x/100)
Total profit=3*100+6*100(1+x/100)
Average profit=Total profit/9=100/3+200/3(1+x/100)
We know that it is equal to 300
100/3+200/3(1+x/100)=300
200(1+x/100)=800
1+x/100=4
x=300

So, both revenue and costs increased by 300% in the second period, thefore the ratio of revenues is 1/4.
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Re: A firm's financial data for 2004-2006 is given in this chart (all figu [#permalink]  24 Mar 2011, 05:41
+1 for you bagrettin. Thanks for answering. Is this a GMAT question?
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Manager
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Kudos [?]: 107 [0], given: 12

Re: A firm's financial data for 2004-2006 is given in this chart (all figu [#permalink]  24 Mar 2011, 07:14
Mmm.
Why not? I suppose that wording on GMAT will be better and more exact.
However, this question is a mix of analyzing of verbal information, ratios, averages and basic economic terms such as revenue or profit. Pretty good for the exam like GMAT.

In any case, you should be able to solve such problems. Be sure you know well how to calculate average of two groups combining together and other stuff like that.

Best wishes!
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Re: A firm's financial data for 2004-2006 is given in this chart (all figu [#permalink]  24 Mar 2011, 17:57
Expert's post
This is a Data Interpretation question. You could see one or two such questions on the exam. These questions are generally straight forward. You just need to be comfortable with the terminology (Revenue, Cost, Profit etc) and how they are related to each other. But an actual GMAT question would be much clearer and exact.
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Director
Status: Matriculating
Affiliations: Chicago Booth Class of 2015
Joined: 03 Feb 2011
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Re: A firm's financial data for 2004-2006 is given in this chart (all figu [#permalink]  02 Apr 2011, 22:03
bagrettin
What is your 30 sec strategy to crack this? Hope I am not asking too much

bagrettin wrote:
In the problem we have 2 periods 2004-2006 (3 years) and 2007-2012 (6 years).
For the first period the average revenue is (1100+700+300)/3=700
The average costs is (400+900+500)/3=600
So, the average profit is 700-600=100
Let assume that both revenue and costs increased in the second period by x percents. Then new average revenue for 2007-2012 is 700(1+x/100), new average costs is 600(1+x/100).
To calculate average profit for the whole total period 2004-2012 we need to sum all revenues, subtract all costs and divide by 9.
Total revenues=3*700+6*700(1+x/100)
Total costs=3*600+6*600(1+x/100)
Total profit=3*100+6*100(1+x/100)
Average profit=Total profit/9=100/3+200/3(1+x/100)
We know that it is equal to 300
100/3+200/3(1+x/100)=300
200(1+x/100)=800
1+x/100=4
x=300

So, both revenue and costs increased by 300% in the second period, thefore the ratio of revenues is 1/4.
Manager
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Kudos [?]: 107 [1] , given: 12

Re: A firm's financial data for 2004-2006 is given in this chart (all figu [#permalink]  02 Apr 2011, 22:48
1
KUDOS
I'll tell you that solution will not differ a lot.

0 sec
Average profit 2004-2006=(1100+700+300-400-900-500)/3=300/3=100

10 sec Revenue increases by x, costs increases by x -> profit increases by x

15 sec
Average profit 2004-2012=(3*100+6*100x)/9=300
3+6x=27
6x=24
x=4

25 sec
x=4 -> ratio of revenues is 1/4

30 sec
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Re: A firm's financial data for 2004-2006 is given in this chart (all figu [#permalink]  02 Apr 2011, 23:35
Bull's eye bagrettin I got the gem I was looking for this line -
Revenue increases by x, costs increases by x -> profit increases by x
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Re: A firm's financial data for 2004-2006 is given in this chart (all figu [#permalink]  29 Apr 2011, 22:09
[(2100+ 4200 *x/100) + (1800 + 3600 * x/100) ] / 9 = 300

will give x = 4.

Hence the ratio is 1/4.
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Manager
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Re: A firm's financial data for 2004-2006 is given in this chart (all figu [#permalink]  06 Jan 2015, 23:28
Let
R1 = Revenue between 2004 and 2006
R2 = Revenue between 2007 and 2012

C1 = Cost between 2004 and 2006
C2 = Cost between 2007 and 2012

P1 = Profit between 2004 and 2006
P2 = Profit between 2007 and 2012

Find Avg R1 / Avg R2 = ?

Between 2004 and 2007

R1 = 300+700+1100 = 2100
C1 = 400+900+500 = 1800

Avg R1 = 2100 / 3 = 700
Avg C1 = 1800 / 3 = 600
Avg P1 = 100
---------------------------

Totak Profit = 300,000

P2 = [3*(100) + 6*(x)] / 9 = 300,000
P2 = 400 = Avg R2 - Avg C2 -------------------------------------(I)

--------------------------

Given Avg Cost change = Avg Revenue change

Therefore

Change / Original = x / 100 (Change formula)

[Avg R2 - Avg R1 ] / Avg R1 = [Avg C2 - Avg C1] / Avg C1

i.e.

[Avg R2 - 700] / 700 = [Avg C2 - 600] / 600

Avg C2 = 6/7 Avg R2

From (I) we have
P2 = 400 = Avg R2 - Avg C2

400 = Avg R2 - 6/7 Avg R2

400 = Avg R2 / 7
2800 = Avg R2

therefore

Avg R1 / Avg R2 = 700 / 2800 = 1/4
Re: A firm's financial data for 2004-2006 is given in this chart (all figu   [#permalink] 06 Jan 2015, 23:28
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