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

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VP
Joined: 22 Oct 2006
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The total cost for Company X to produce a batch of tools is [#permalink]  25 Feb 2007, 20:50
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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, 12:02, edited 2 times in total.
Edited the question and added the OA
Manager
Joined: 12 Feb 2006
Posts: 115
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I just did it real quickly and got 4.50.

Basically 90,000/20,000.
Manager
Status: Post MBA, working in the area of Development Finance
Joined: 09 Oct 2006
Posts: 170
Location: Africa
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Kudos [?]: 3 [0], given: 1

[(8-3)xno. of tools - 10.000]/no of tools is the answer which is
90,000/20,000=4.5
VP
Joined: 22 Oct 2006
Posts: 1443
Schools: Chicago Booth '11
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Kudos [?]: 154 [0], given: 12

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
Manager
Joined: 15 Apr 2011
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Re: The total cost for Company X to produce a batch of tools is [#permalink]  07 Apr 2012, 11:53
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]  07 Apr 2012, 12:07
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Expert's post
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]  06 May 2012, 23:31
Expert's post
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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Intern
Joined: 26 Nov 2011
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Re: The total cost for Company X to produce a batch of tools is [#permalink]  21 Jun 2012, 00:53
1
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
GMAT Club Legend
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Re: The total cost for Company X to produce a batch of tools is [#permalink]  10 Jan 2014, 00:46
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Manager
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Re: The total cost for Company X to produce a batch of tools is [#permalink]  10 Jan 2014, 00:50
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
Manager
Joined: 07 Apr 2014
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Re: The total cost for Company X to produce a batch of tools is [#permalink]  11 Sep 2014, 05:43
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
Intern
Joined: 09 Sep 2014
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Re: The total cost for Company X to produce a batch of tools is [#permalink]  11 Sep 2014, 07:02
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.
Re: The total cost for Company X to produce a batch of tools is   [#permalink] 11 Sep 2014, 07:02
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