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A company produces school bags. The cost for producing the first 1,000

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Joined: 07 Jun 2017
Posts: 177

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Location: India
Concentration: Technology, General Management
GMAT 1: 660 Q46 V38
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WE: Information Technology (Computer Software)
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A company produces school bags. The cost for producing the first 1,000 [#permalink]

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New post 03 Nov 2017, 04:34
00:00
A
B
C
D
E

Difficulty:

  45% (medium)

Question Stats:

63% (00:59) correct 38% (01:05) wrong based on 32 sessions

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A company produces school bags. The cost for producing the first 1,000 bags of a particular design, owing to initial expenses,
turns out to be $30 per bag. Thereafter, the cost reduces to $10 per bag. If the company produced 5,000 bags of a certain
design and sold them all at an average price of $20 per bag, which of the following will represent the best approximation for
the percentage profit earned by the company on the expenses incurred in producing these bags?

A. 10%
B. 20%
C. 30%
D. 40%
E. 50%
[Reveal] Spoiler: OA

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Naveen
email: nkmungila@gmail.com
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Kudos [?]: 102 [0], given: 59

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Joined: 22 May 2016
Posts: 1126

Kudos [?]: 402 [0], given: 645

A company produces school bags. The cost for producing the first 1,000 [#permalink]

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New post 03 Nov 2017, 05:26
nkmungila wrote:
A company produces school bags. The cost for producing the first 1,000 bags of a particular design, owing to initial expenses,
turns out to be $30 per bag. Thereafter, the cost reduces to $10 per bag. If the company produced 5,000 bags of a certain
design and sold them all at an average price of $20 per bag, which of the following will represent the best approximation for
the percentage profit earned by the company on the expenses incurred in producing these bags?

A. 10%
B. 20%
C. 30%
D. 40%
E. 50%

(Total revenue - total cost) = gross profit

Total revenue:
$20 per bag * 5,000 bags = $100,000

Total cost for 5,000:

1) First 1,000:
($30 per bag * 1,000) = $30,000

2) Next 4,000:
($10 per bag * 4,000) = $40,000

TOTAL COST:
$30,000 + $40,000 = $70,000

(TR - TC) = profit

Profit: ($100,000-70,000) =$30,000
Cost: $70,000

Approximate percentage profit earned by the company on the expenses incurred:

\(\frac{30,000}{70,000}=\frac{3}{7}= .43 * 100 =\)

Approximately 40 percent

Answer D

Kudos [?]: 402 [0], given: 645

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Re: A company produces school bags. The cost for producing the first 1,000 [#permalink]

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New post 03 Nov 2017, 05:41
nkmungila wrote:
A company produces school bags. The cost for producing the first 1,000 bags of a particular design, owing to initial expenses,
turns out to be $30 per bag. Thereafter, the cost reduces to $10 per bag. If the company produced 5,000 bags of a certain
design and sold them all at an average price of $20 per bag, which of the following will represent the best approximation for
the percentage profit earned by the company on the expenses incurred in producing these bags?

A. 10%
B. 20%
C. 30%
D. 40%
E. 50%


Weighted average is another good method..
Total 5000: 1000 at 30 and 4000 at 10..
So the average cost = \(10+(30-10)*\frac{1000}{5000}=10+4=14\)
So profit =20-14=6
Profit%=6/14*100=300/7=43%~40%
D
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Kudos [?]: 6125 [0], given: 121

Re: A company produces school bags. The cost for producing the first 1,000   [#permalink] 03 Nov 2017, 05:41
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A company produces school bags. The cost for producing the first 1,000

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