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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: 176
Location: India
Concentration: Technology, General Management
GMAT 1: 660 Q46 V38
GPA: 3.6
WE: Information Technology (Computer Software)
A company produces school bags. The cost for producing the first 1,000 [#permalink]

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03 Nov 2017, 05:34
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Difficulty:

45% (medium)

Question Stats:

63% (00:57) correct 38% (01:06) wrong based on 40 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 _________________ Regards, Naveen email: nkmungila@gmail.com Please press kudos if you like this post VP Joined: 22 May 2016 Posts: 1426 A company produces school bags. The cost for producing the first 1,000 [#permalink] ### Show Tags 03 Nov 2017, 06:26 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

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Formerly genxer123

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Joined: 02 Aug 2009
Posts: 5725
Re: A company produces school bags. The cost for producing the first 1,000 [#permalink]

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03 Nov 2017, 06:41
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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Re: A company produces school bags. The cost for producing the first 1,000   [#permalink] 03 Nov 2017, 06:41
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