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A company determines its yearly profits by deducting its operating exp

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A company determines its yearly profits by deducting its operating exp  [#permalink]

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New post 13 Jul 2018, 03:29
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94% (01:02) correct 6% (00:40) wrong based on 62 sessions

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A company determines its yearly profits by deducting its operating expenses from its revenue for that year. Company X manufactures only widgets and gadgets. Company X's profits for this year are significantly higher than those for last year, although the company's operating expenses remained the same and the company sold the same number of widgets and gadgets as it did last year.

The statements above, if true, best support which of the following conclusions?


A. Consumers purchased more widgets and gadgets this year than they did last year.

B. Company X has raised the price of its widgets or of its gadgets since last year.

C. Company X's main competitors sold fewer widgets and gadgets this year than they did Company X.

D. Company X introduced a new type of widget this year.

E. Company X spent more on advertising this year than it did last year.

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Re: A company determines its yearly profits by deducting its operating exp  [#permalink]

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New post 13 Jul 2018, 03:43
Bunuel wrote:
A company determines its yearly profits by deducting its operating expenses from its revenue for that year. Company X manufactures only widgets and gadgets. Company X's profits for this year are significantly higher than those for last year, although the company's operating expenses remained the same and the company sold the same number of widgets and gadgets as it did last year.

The statements above, if true, best support which of the following conclusions?


A. Consumers purchased more widgets and gadgets this year than they did last year.

B. Company X has raised the price of its widgets or of its gadgets since last year.

C. Company X's main competitors sold fewer widgets and gadgets this year than they did Company X.

D. Company X introduced a new type of widget this year.

E. Company X spent more on advertising this year than it did last year.


Given: Profits = Revenue - Operational Costs
Revenue = Revenue per Item times number of items sold.

Now we're told that the number of items sold is the same and the Operational costs are same, yet the profit earned is higher, the only possible way to increase the Revenue is by increasing Revenue per item i.e. Price of widgets has been raised. Option B
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Re: A company determines its yearly profits by deducting its operating exp  [#permalink]

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New post 13 Jul 2018, 03:54
Bunuel wrote:
A company determines its yearly profits by deducting its operating expenses from its revenue for that year. Company X manufactures only widgets and gadgets. Company X's profits for this year are significantly higher than those for last year, although the company's operating expenses remained the same and the company sold the same number of widgets and gadgets as it did last year.


Stimulus :
Company X Profit = Revenue - Operating expenses
Profit Now > Profit Last

Pre-thinking:
So, there is no change in latter determining factor of Company X's Profit i.e, Operating expenses, and number of items sold is also the same.
What could be the deciding factor?? ....The price of each item this year

B. Company X has raised the price of its widgets or of its gadgets since last year. --> Correct, matches our pre-thinking

Hence, B.
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Re: A company determines its yearly profits by deducting its operating exp &nbs [#permalink] 13 Jul 2018, 03:54
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