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# The total cost of producing item X is equal to the sum of

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The total cost of producing item X is equal to the sum of [#permalink]

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11 Aug 2008, 00:35
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The total cost of producing item X is equal to the sum of item X's fixed cost and variable cost. If the variable cost of producing X decreased by 5% in January, by what percent did the total cost of producing item X change in January?

(1) The fixed cost of producing item X increased by 13% in January.

(2) Before the changes in January, the fixed cost of producing item X was 5 times the variable cost of producing item X.

Total = Fixed + Variable .... given

Variable (new) = 0.95 Variable (old)

Stmt 1 - is not suff individual % changes in Fixed and Variable is not suff to cal % change in Total

Total ( new) = 1.13 Fixed(old) + 0.95 Variable(old)

% change = ( Total (new) - Total (old) )/ Total (old)

above cannot be cal hence not poss

Stmt 2

Fixed (old) = 5*Varaible (old)

Hence Total (old) = 6 Variable (old)

Total(new) = 6 *0.95 * Variable(old)

using Total (new) and Total (old) we can calculate % change...

Hence B

Is above reasoning correct?

Thanks
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11 Aug 2008, 00:50
sjgmat wrote:
The total cost of producing item X is equal to the sum of item X's fixed cost and variable cost. If the variable cost of producing X decreased by 5% in January, by what percent did the total cost of producing item X change in January?

(1) The fixed cost of producing item X increased by 13% in January.

(2) Before the changes in January, the fixed cost of producing item X was 5 times the variable cost of producing item X.

Total = Fixed + Variable .... given

Variable (new) = 0.95 Variable (old)

Stmt 1 - is not suff individual % changes in Fixed and Variable is not suff to cal % change in Total

Total ( new) = 1.13 Fixed(old) + 0.95 Variable(old)

% change = ( Total (new) - Total (old) )/ Total (old)

above cannot be cal hence not poss

Stmt 2

Fixed (old) = 5*Varaible (old)

Hence Total (old) = 6 Variable (old)

Total(new) = 6 *0.95 * Variable(old)

using Total (new) and Total (old) we can calculate % change...

Hence B

Is above reasoning correct?

Thanks

OA is rightly C) because statement 2) talks about before changes in January and Q is percent variation after changes in January.

Therefore you need both 1) and 2)
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11 Aug 2008, 00:58
nmohindru wrote:
sjgmat wrote:
The total cost of producing item X is equal to the sum of item X's fixed cost and variable cost. If the variable cost of producing X decreased by 5% in January, by what percent did the total cost of producing item X change in January?

(1) The fixed cost of producing item X increased by 13% in January.

(2) Before the changes in January, the fixed cost of producing item X was 5 times the variable cost of producing item X.

Total = Fixed + Variable .... given

Variable (new) = 0.95 Variable (old)

Stmt 1 - is not suff individual % changes in Fixed and Variable is not suff to cal % change in Total

Total ( new) = 1.13 Fixed(old) + 0.95 Variable(old)

% change = ( Total (new) - Total (old) )/ Total (old)

above cannot be cal hence not poss

Stmt 2

Fixed (old) = 5*Varaible (old)

Hence Total (old) = 6 Variable (old)

Total(new) = 6 *0.95 * Variable(old)

using Total (new) and Total (old) we can calculate % change...

Hence B

Is above reasoning correct?

Thanks

OA is rightly C) because statement 2) talks about before changes in January and Q is percent variation after changes in January.

Therefore you need both 1) and 2)

Thats correct we are given relation between Fixed and Variable cost before January, but 5% change in Variable is after January

So while calculating Total(new) I am considering 5% decrease in cost of Variable.

If I am not mistaken, you mean to say that I can't consider the relation between Fixed and Variable cost after January??

I am sorry but I am still unable to understand why OA - C

can you please explain with some details/examples

Thanks a lot
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11 Aug 2008, 01:15
sjgmat wrote:
Thats correct we are given relation between Fixed and Variable cost before January, but 5% change in Variable is after January

So while calculating Total(new) I am considering 5% decrease in cost of Variable.

If I am not mistaken, you mean to say that I can't consider the relation between Fixed and Variable cost after January??

I am sorry but I am still unable to understand why OA - C

can you please explain with some details/examples

Thanks a lot

No what I mean is you have to consider changes in January for fixed cost as well. These changes are given in statement 1) so statement 1) is required
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11 Aug 2008, 06:25
Agree. Choosing B means that you assume the fixed cost remains unchanged in January. However, there is no stated evidence for such case.
Re: DS   [#permalink] 11 Aug 2008, 06:25
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