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 Your Progress

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

Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.

It appears that you are browsing the GMAT Club forum unregistered!

Signing up is free, quick, and confidential.
Join other 500,000 members and get the full benefits of GMAT Club

Registration gives you:

Tests

Take 11 tests and quizzes from GMAT Club and leading GMAT prep companies such as Manhattan GMAT,
Knewton, and others. All are free for GMAT Club members.

Applicant Stats

View detailed applicant stats such as GPA, GMAT score, work experience, location, application
status, and more

Books/Downloads

Download thousands of study notes,
question collections, GMAT Club’s
Grammar and Math books.
All are free!

Thank you for using the timer!
We noticed you are actually not timing your practice. Click the START button first next time you use the timer.
There are many benefits to timing your practice, including:

Profit down 20%, costs up 10%, so % change in revenues =? [#permalink]
02 Apr 2011, 05:09

1

This post received KUDOS

1

This post was BOOKMARKED

If profits are down 20%, and costs are up 10%, how do we know sales must be down 10%?

This is just one part of a larger case interview question but I just can't figure it out. I'd think the ratio of new revenues to new costs should factor into the calculation but I've run into this in a mock interview and a case that I read online, and both times they assumed this was a very simple calculation that was independent of the actual costs and revenues. Can anyone explain why?

Re: Profit down 20%, costs up 10%, so % change in revenues =? [#permalink]
03 Apr 2011, 22:31

I don't think you can come to the conclusion that sales MUST be down 10%... there is a piece of information missing here. I'm thinking the margin, and maybe the equation they are working with... I am assuming you are working with the very basic equation of: Profits = Sales - Cost

Lets try thinking this out loud:

profits = sales - cost

lets say profits last period were 100. Sales 200, Cost 100.

profits down 20% = profits 80 in current period. Costs up 10% = costs 110 in current period. X = Sales

Re: Profit down 20%, costs up 10%, so % change in revenues =? [#permalink]
04 Apr 2011, 10:08

Taking a preschool approach, its sounds like someone is saying 20% of profits have disappeared, we know that 10% of it is attributable to higher costs, therefore the other 10% must be attributable to lower sales since that's the remaining variable in play.

But if it's phrased as posted, then you guys are correct that there is missing information. As posted, the mathematics do not produce a constant.