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In 1999, Company X's gross profit was what percent of its [#permalink]
14 Apr 2006, 12:49

00:00

A

B

C

D

E

Difficulty:

5% (low)

Question Stats:

54% (01:59) correct
45% (00:45) wrong based on 11 sessions

In 1999, Company X's gross profit was what percent of its revenue? 1. In 1999 Company X's gross profit was 1/3 of its expenses 2. In 1999 Company X's expenses were 3/4 of its revenue.

In 1999, Company X's gross profit was what percent of its revenue?
1. In 1999 Company X's gross profit was 1/3 of its expenses
2. In 1999 Company X's expenses were 3/4 of its revenue.

Let's remember that gross profit equals revenue - expenses.

Statement 1: GP = 1/3 E
GP = R - E
GP = R - 3GP
R = 4GP

Therefore, Gross profit is 1/4 of revenues.

Statement 2: E = 3/4R
GP = R - E
GP = R - 3/4R
GP = 1/4R

But jcgoodchild, can we just assume that gross profit = revenue - expenses?

Realistically, what if the company had say an amortization charge? If GMAC wants us to use this formula, won't they actually display it next to the question? Because accordingly the answer would be D or C.

Well, I would be surprised if they didn't tell you in question how to get gross profit. However, even in real life, amortization charges are not applied to gross profit, they are applied to net profit. Gross profit is simply revenue minus all costs related to generating that revenue.

from first P =1/3* E so R = 4/3 *E from this we can find the percentage

from second E = 3/4 * R so P =1/4 * R From this we can find the percentage

so D

Got the same. Agree! with ipc's solution
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"To dream anything that you want to dream, that is the beauty of the human mind. To do anything that you want to do, that is the strength of the human will. To trust yourself, to test your limits, that is the courage to succeed."

this question, from gmatprep, seems pretty nasty to me:

In 1999, Company X's gross profit was what percent of its revenue?

1. In 1999, Company X's gross profit was 1/3 of its expenses.

2. In 1999, Company X's expenses were 3/4 of its revenue

I could have easily guessed the correct answer, but no where does it strictly state that GP=Rev-Expenses I thought this was a trick question so I selected E since no formulaic information was given...does anyone else agree that this question is bogus? Now when I take the test, I may keep second-guessing myself about if I'm making too many assumptions, or not enough assumptions.

Re: DS gross profit [#permalink]
02 Aug 2008, 20:16

young_gun wrote:

this question, from gmatprep, seems pretty nasty to me:

In 1999, Company X's gross profit was what percent of its revenue?

1. In 1999, Company X's gross profit was 1/3 of its expenses.

2. In 1999, Company X's expenses were 3/4 of its revenue

I could have easily guessed the correct answer, but no where does it strictly state that GP=Rev-Expenses I thought this was a trick question so I selected E since no formulaic information was given...does anyone else agree that this question is bogus? Now when I take the test, I may keep second-guessing myself about if I'm making too many assumptions, or not enough assumptions.

This question does not require any formula of profit and loss or revenue and expenses.Just we got to treat this as a set of equations : Question:p=x(r) x=? p=profit r=revenue

consider (1) : p=1/3 * e but here we cant get relation between e and r hence does not answer =>insufficient

consider (2) : e=3/4 * r => this does not solve since we dont know hows e related to p again =>? insufficient consder (1) and (2) => p=1/3*e and e=3/4 * r => p = 1/3 * 3/4 * r => hence x=1/4 => sufficient

IMO C I hope no where we require actual formulae and stuff here it uses a direct linear relation between variables
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