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# The total cost for Company X to produce a batch of tools is

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VP
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The total cost for Company X to produce a batch of tools is [#permalink]

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25 Feb 2007, 21:50
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89% (03:41) correct 11% (01:37) wrong based on 830 sessions

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The total cost for Company X to produce a batch of tools is $10,000 plus$3 per tool. Each tool sells for $8. The gross profit earned from producing and selling these tools is the total income from sales minus the total production cost. If a batch of 20,000 tools is produced and sold, then Company X’s gross profit per tool is (A)$3.00
(B) $3.75 (C)$4.50
(D) $5.00 (E)$5.50

I keep getting an answer different from OA, and I know I must be missing something simple
[Reveal] Spoiler: OA

Last edited by Bunuel on 07 Apr 2012, 13:02, edited 2 times in total.
Edited the question and added the OA
Manager
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26 Feb 2007, 02:13
I just did it real quickly and got 4.50.

Basically 90,000/20,000.
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26 Feb 2007, 05:05
[(8-3)xno. of tools - 10.000]/no of tools is the answer which is
90,000/20,000=4.5
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26 Feb 2007, 13:26
oh I see what I did wrong, I ended up with 170,000 - 70,000 meaning I incoroprated the 10,000 in the profits, when it was only part of the cost

Thanks
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Re: The total cost for Company X to produce a batch of tools is [#permalink]

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07 Apr 2012, 12:53
Can someone explain this please? thanks.
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Re: The total cost for Company X to produce a batch of tools is [#permalink]

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07 Apr 2012, 13:07
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Can someone explain this please? thanks.

The total cost for Company X to produce a batch of tools is $10,000 plus$3 per tool. Each tool sells for $8. The gross profit earned from producing and selling these tools is the total income from sales minus the total production cost. If a batch of 20,000 tools is produced and sold, then Company X’s gross profit per tool is (A)$3.00
(B) $3.75 (C)$4.50
(D) $5.00 (E)$5.50

The total production cost of 20,000 tools is $10,000 +$3*20,000 = $70,000; The total income from sales of 20,000 tools is$8*20,000 = $160,000; The gross profit earned is$160,000 - $70,000 =$90,000;
The gross profit per tool is $90,000/20,000 =$4.50.

Hope it's clear.
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Re: The total cost for Company X [#permalink]

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07 May 2012, 00:31
sravanth wrote:
The total cost for Company X to produce a batch of tools is $10,000 plus$3 per tool. Each tool sells for $8. The gross profit earned from producing and selling these tools is the total income from sales minus the total production cost. If a batch of 20,000 tools is produced and sold, then Company X’s gross profit per tool is (A)$3.00
(B) $3.75 (C)$4.50
(D) $5.00 (E)$5.50

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Re: The total cost for Company X to produce a batch of tools is [#permalink]

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21 Jun 2012, 01:53
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KUDOS
TC = 10,000 + 3x

TR = 8x

Profit = 8x - 10000 - 3x = 5x - 10000

when x = 20000, Profit = 90000

Profit per x = 90000/20000 = 4.5

terp26 wrote:
The total cost for Company X to produce a batch of tools is $10,000 plus$3 per tool. Each tool sells for $8. The gross profit earned from producing and selling these tools is the total income from sales minus the total production cost. If a batch of 20,000 tools is produced and sold, then Company X’s gross profit per tool is (A)$3.00
(B) $3.75 (C)$4.50
(D) $5.00 (E)$5.50

I keep getting an answer different from OA, and I know I must be missing something simple
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Re: The total cost for Company X to produce a batch of tools is [#permalink]

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10 Jan 2014, 01:46
Hello from the GMAT Club BumpBot!

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Re: The total cost for Company X to produce a batch of tools is [#permalink]

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10 Jan 2014, 01:50
terp26 wrote:
The total cost for Company X to produce a batch of tools is $10,000 plus$3 per tool. Each tool sells for $8. The gross profit earned from producing and selling these tools is the total income from sales minus the total production cost. If a batch of 20,000 tools is produced and sold, then Company X’s gross profit per tool is (A)$3.00
(B) $3.75 (C)$4.50
(D) $5.00 (E)$5.50

I keep getting an answer different from OA, and I know I must be missing something simple

Step 1) Create equations: [10,000 + 3*X = Total Cost] [5*X = Revenue] [Gross Profit = TC - R]

Step 2) Insert the variable: We are given X = 20,000 so Total cost = 70,000, Revenue = 160,000 and Gross Profit = 90,000

Now, the gross profit per tool is exactly what it says, Gross Profit/X ----> 90,000/20,000 ----> 4.5 USD per tool
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Re: The total cost for Company X to produce a batch of tools is [#permalink]

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11 Sep 2014, 06:43
terp26 wrote:
The total cost for Company X to produce a batch of tools is $10,000 plus$3 per tool. Each tool sells for $8. The gross profit earned from producing and selling these tools is the total income from sales minus the total production cost. If a batch of 20,000 tools is produced and sold, then Company X’s gross profit per tool is (A)$3.00
(B) $3.75 (C)$4.50
(D) $5.00 (E)$5.50

I keep getting an answer different from OA, and I know I must be missing something simple

production cost = 10000 + (3*20000 ) = 70000

selling cost = 20000* 8 = 160000

160000-70000 = 90000/20000 = 4.5
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Re: The total cost for Company X to produce a batch of tools is [#permalink]

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11 Sep 2014, 08:02
This problem is simple but was hard for me at first. The way I ended up with a solution was seeing that each tool made $5 each and the 10,000 cost of production spread over 20,000 tools meant each tool had an additional cost of .50 making individual profit 4.50 per tool. GMAT Club Legend Joined: 09 Sep 2013 Posts: 12279 Followers: 542 Kudos [?]: 152 [0], given: 0 Re: The total cost for Company X to produce a batch of tools is [#permalink] ### Show Tags 21 Dec 2015, 12:45 Hello from the GMAT Club BumpBot! Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos). Want to see all other topics I dig out? Follow me (click follow button on profile). You will receive a summary of all topics I bump in your profile area as well as via email. _________________ Senior Manager Status: Founder & CEO Affiliations: Target Test Prep Joined: 14 Oct 2015 Posts: 344 Location: United States (CA) Followers: 8 Kudos [?]: 90 [0], given: 1 Re: The total cost for Company X to produce a batch of tools is [#permalink] ### Show Tags 07 Jun 2016, 10:56 terp26 wrote: The total cost for Company X to produce a batch of tools is$10,000 plus $3 per tool. Each tool sells for$8. The gross profit earned from producing and selling these tools is the total income from sales minus the total production cost. If a batch of 20,000 tools is produced and sold, then Company X’s gross profit per tool is

(A) $3.00 (B)$3.75
(C) $4.50 (D)$5.00
(E) $5.50 The problem first asks us to calculate the gross profit. The profit equation is as follows: Profit = Revenue – Cost In this particular case, we are given VARIABLE REVENUE and VARIABLE COST. This means that Company X makes a certain amount of revenue PER TOOL and has a certain cost PER TOOL. We also are given a FIXED COST. This is a cost that is constant and will not change. Thus we need to take into account the quantity of tools being produced and sold as well as the fixed cost. We can now generate a more detailed profit equation: Profit = (number of tools sold)(revenue per tool) – [fixed cost + (number of tools made)(cost per tool)] We are given the following: fixed cost =$10,000

cost per tool = $3 revenue per tool =$8

Number of tools produced and sold = 20,000

We can now plug all this into our profit equation:

Profit = (number of tools sold)(revenue per tool) – [fixed cost + (number of tools made)(cost per tool)]

P = 20,000 x 8 – [10,000 + (3 x 20,000)]

P = 20,000 x 8 – [10,000 + (3 x 20,000)]

P = 160,000 – [10,000 + 60,000]

P = 160,000 – 70,000

P = 90,000

We have a profit of $90,000 for selling 20,000 tools, but remember that we need to determine the profit PER TOOL. To calculate this, we divide the total profit of$90,000 by the number of tools produced, which is 20,000. We have:

$90,000/20,000 =$9/2 = $4.50 Answer C. _________________ Jeffrey Miller Scott Woodbury-Stewart Founder and CEO Manager Joined: 20 Mar 2015 Posts: 69 Followers: 0 Kudos [?]: 17 [0], given: 9 The total cost for Company X to produce a batch of tools is [#permalink] ### Show Tags 28 Jun 2016, 23:28 terp26 wrote: The total cost for Company X to produce a batch of tools is$10,000 plus $3 per tool. Each tool sells for$8. The gross profit earned from producing and selling these tools is the total income from sales minus the total production cost. If a batch of 20,000 tools is produced and sold, then Company X’s gross profit per tool is

(A) $3.00 (B)$3.75
(C) $4.50 (D)$5.00
(E) $5.50 Fixed cost =$10,000
Selling price is $8/tool and production cost is$3/tool.
$(8-3) =$5(Profit)

5*20,000 = $100,000$100,000-$10,000(FC) =$90,000(Gross profit.)

Gross profit/tool = $90,000/20,000 = 4.5 C. The total cost for Company X to produce a batch of tools is [#permalink] 28 Jun 2016, 23:28 Similar topics Replies Last post Similar Topics: Company C produces toy trucks at a cost of$5.00 each for the first 10 1 27 May 2016, 04:13
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