It is currently 21 Nov 2017, 10:54

### GMAT Club Daily Prep

#### Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

# Events & Promotions

###### Events & Promotions in June
Open Detailed Calendar

# A firm's annual revenue grows twice as fast as its costs. In

Author Message
TAGS:

### Hide Tags

Director
Joined: 25 Apr 2012
Posts: 722

Kudos [?]: 865 [3], given: 724

Location: India
GPA: 3.21
A firm's annual revenue grows twice as fast as its costs. In [#permalink]

### Show Tags

27 Mar 2013, 08:15
3
KUDOS
14
This post was
BOOKMARKED
00:00

Difficulty:

95% (hard)

Question Stats:

51% (03:51) correct 49% (02:55) wrong based on 276 sessions

A firm's annual revenue grows twice as fast as its costs. In 2007 it operated at a $1000 loss, it broke even in 2008, and in 2009 its revenues were 44% higher than in 2007. If the firm's revenues and costs grew at a constant rate over this period, what was its profit in 2009? A. 700 B. 1000 C. 1300 D. 1600 E. 2000 I found this problem quite difficult to be solved under 2 mins. Will be really keen to know if there are any shortcuts to handle such Questions. Would you rate this problem a 700 + ?? [Reveal] Spoiler: OA _________________ “If you can't fly then run, if you can't run then walk, if you can't walk then crawl, but whatever you do you have to keep moving forward.” Kudos [?]: 865 [3], given: 724 Director Joined: 17 Dec 2012 Posts: 623 Kudos [?]: 535 [5], given: 16 Location: India Re: A firm's annual revenue grows twice as fast as its costs. In [#permalink] ### Show Tags 16 Aug 2013, 19:23 5 This post received KUDOS Expert's post 1 This post was BOOKMARKED 1. Let the revenues and costs in 2007 be r1 and c1 respectively. We have r1-c1=-1000 2. Let revenues in 2008 be r2 and c2 respectively. We have r2-c2=0 3. Let revenues and costs in 2009 be r3 and c3 respectively. we have r3=1.44r1. 4. Since the growth rate of sales is constant, growth rate per year is 20%. growth rate of costs is half of that which is 10% 5. (2) can be written as 1.2 r1-1.1 c1=0 6. Solving for (1) and (5), we have c1=12000 andr1=11000 7. r3=1.44*11000= 15840 and c3=1.21*12000=14520 8. Therefore profit in 2009=15840-14520=1320 The answer should be$1320
_________________

Srinivasan Vaidyaraman
Sravna
http://www.sravnatestprep.com/regularcourse.php

Standardized Approaches

Kudos [?]: 535 [5], given: 16

Intern
Joined: 29 Jan 2013
Posts: 21

Kudos [?]: 14 [1], given: 1

Location: United States
Concentration: Strategy
GMAT 1: 710 Q50 V36
GPA: 3.4
WE: Analyst (Consulting)
Re: A firm's annual revenue grows twice as fast as its costs [#permalink]

### Show Tags

27 Mar 2013, 12:48
1
KUDOS
2
This post was
BOOKMARKED
mridulparashar1 wrote:
A firm's annual revenue grows twice as fast as its costs. In 2007 it operated at a $1000 loss, it broke even in 2008, and in 2009 its revenues were 44% higher than in 2007. If the firm's revenues and costs grew at a constant rate over this period, what was its profit in 2009? A. 700 B. 1000 C. 1300 D. 1600 E. 2000 First solve for how much revenue is increasing each year: R2008 = R2007*(1+x) R2009 = R2007*(1+x)^2=1.44*R2007 (1+x)^2 = 1.44 1+x=1.2 x=0.2 aka revenue increases 20% each year and cost increases 10% annually Next solve for R2007 and C2007: R2007 = C2007 - 1000 1.2*R2007 - 1.1*C2007 = 0 1.2*[C2007 - 1000] - 1.1*C2007 = 0 0.1*C2007 = 1,200 C2007 = 12,000 R2007 = 11,000 Finally find 2009 profits: Profit2009 = 1.44*11,000 - 1.21*12,000 Profit2009 = 15,840 - 14,520 Profit2009 = 1320 Answer: C Kudos [?]: 14 [1], given: 1 Veritas Prep GMAT Instructor Joined: 16 Oct 2010 Posts: 7743 Kudos [?]: 17834 [1], given: 235 Location: Pune, India Re: A firm's annual revenue grows twice as fast as its costs. In [#permalink] ### Show Tags 17 Sep 2014, 22:24 1 This post received KUDOS Expert's post 3 This post was BOOKMARKED WoundedTiger wrote: A firm's annual revenue grows twice as fast as its costs. In 2007 it operated at a$1000 loss, it broke even in 2008, and in 2009 its revenues were 44% higher than in 2007. If the firm's revenues and costs grew at a constant rate over this period, what was its profit in 2009?

A. 700
B. 1000
C. 1300
D. 1600
E. 2000

I found this problem quite difficult to be solved under 2 mins. Will be really keen to know if there are any shortcuts to handle such Questions.
Would you rate this problem a 700 + ??

Revenues increased by 44% in 2 years. Rate of revenue increase per year is the same. So

$$(1 + x)^2 = 1.44$$
$$x = 20%$$

So revenue increases by 20% per year and since cost increases at half the rate, cost increases by 10% every year.

Say 2007 revenue is R and 2007 cost is C.
We know C = R + 1000 ....(I)

In 2008, they break even.
So 1.1*C = 1.2R
Substituting from (I), 1.1*(R + 1000) = 1.2R
R = 11,000
C = 12,000

In 2009,
Profit = (1.2)^2*R - (1.1)^2C = 1.44*11,000 - 1.21*12000 = 1320
_________________

Karishma
Veritas Prep | GMAT Instructor
My Blog

Get started with Veritas Prep GMAT On Demand for $199 Veritas Prep Reviews Kudos [?]: 17834 [1], given: 235 Senior Manager Joined: 10 Jul 2013 Posts: 326 Kudos [?]: 426 [0], given: 102 Re: A firm's annual revenue grows twice as fast as its costs. In [#permalink] ### Show Tags 16 Aug 2013, 17:36 2013gmat wrote: A firm's annual revenue grows twice as fast as its costs. In 2007 it operated at a$1000 loss, it broke even in 2008, and in 2009 its revenues were 44% higher than in 2007. If the firm's revenues and costs grew at a constant rate over this period, what was its profit in 2009?

A $700 B$1000
C $1300 D$1600
E $2000 can anyone explain above question ? thanks By strict definitions, revenue can not be negative. But in the corrupt world of finance, revenue is a number between positive infinity and negative infinity depending on how the upper management instruct the finance people how to lie on the spreadsheets in their submissions to the Securities and exchange commission. _________________ Asif vai..... Kudos [?]: 426 [0], given: 102 Manager Joined: 21 Aug 2012 Posts: 147 Kudos [?]: 73 [0], given: 41 Re: A firm's annual revenue grows twice as fast as its costs. In [#permalink] ### Show Tags 17 Aug 2013, 02:13 1 This post was BOOKMARKED SravnaTestPrep wrote: 1. Let the revenues and costs in 2007 be r1 and c1 respectively. We have r1-c1=-1000 2. Let revenues in 2008 be r2 and c2 respectively. We have r2-c2=0 3. Let revenues and costs in 2009 be r3 and c3 respectively. we have r3=1.44r1. 4. Since the growth rate of sales is constant, growth rate per year is 20%. growth rate of costs is half of that which is 10% 5. (2) can be written as 1.2 r1-1.1 c1=0 6. Solving for (1) and (5), we have c1=12000 andr1=11000 7. r3=1.44*11000= 15840 and c3=1.21*12000=14520 8. Therefore profit in 2009=15840-14520=1320 The answer should be$1320

How did you deduce that "growth rate per year is 20%."????
_________________

MODULUS Concept ---> http://gmatclub.com/forum/inequalities-158054.html#p1257636
HEXAGON Theory ---> http://gmatclub.com/forum/hexagon-theory-tips-to-solve-any-heaxgon-question-158189.html#p1258308

Kudos [?]: 73 [0], given: 41

Director
Joined: 17 Dec 2012
Posts: 623

Kudos [?]: 535 [0], given: 16

Location: India
Re: A firm's annual revenue grows twice as fast as its costs. In [#permalink]

### Show Tags

17 Aug 2013, 03:32
jaituteja wrote:
SravnaTestPrep wrote:
1. Let the revenues and costs in 2007 be r1 and c1 respectively. We have r1-c1=-1000
2. Let revenues in 2008 be r2 and c2 respectively. We have r2-c2=0
3. Let revenues and costs in 2009 be r3 and c3 respectively. we have r3=1.44r1.
4. Since the growth rate of sales is constant, growth rate per year is 20%. growth rate of costs is half of that which is 10%
5. (2) can be written as 1.2 r1-1.1 c1=0
6. Solving for (1) and (5), we have c1=12000 andr1=11000
7. r3=1.44*11000= 15840 and c3=1.21*12000=14520
8. Therefore profit in 2009=15840-14520=1320

The answer should be $1320 How did you deduce that "growth rate per year is 20%."???? The rate can be calculated from the formula (1+r/100) ^2 = 1.44 , which will give r=20 _________________ Srinivasan Vaidyaraman Sravna http://www.sravnatestprep.com/regularcourse.php Premium Material Standardized Approaches Kudos [?]: 535 [0], given: 16 Manager Joined: 20 Jul 2012 Posts: 156 Kudos [?]: 40 [0], given: 559 Location: India WE: Information Technology (Computer Software) A firm's annual revenue grows twice as fast as its costs. [#permalink] ### Show Tags 13 Feb 2014, 09:06 A firm's annual revenue grows twice as fast as its costs. In 2007 it operated at a$1000 loss, it broke even in 2008, and in 2009 its revenues were 44% higher than in 2007. If the firm's revenues and costs grew at a constant rate over this period, what was its profit in 2009?
a)$700 b)$1000
c)$1300 d)$1600
e)$2000 Also whats the level of this question ? Kudos [?]: 40 [0], given: 559 Math Expert Joined: 02 Sep 2009 Posts: 42283 Kudos [?]: 132935 [0], given: 12391 Re: A firm's annual revenue grows twice as fast as its costs. [#permalink] ### Show Tags 13 Feb 2014, 10:26 akankshasoneja wrote: A firm's annual revenue grows twice as fast as its costs. In 2007 it operated at a$1000 loss, it broke even in 2008, and in 2009 its revenues were 44% higher than in 2007. If the firm's revenues and costs grew at a constant rate over this period, what was its profit in 2009?
a)$700 b)$1000
c)$1300 d)$1600
e)$2000 Also whats the level of this question ? Merging similar topics. Please refer to the solutions above. As for the difficulty level, I'd say it's ~650-700. _________________ Kudos [?]: 132935 [0], given: 12391 Manager Joined: 04 Jan 2014 Posts: 121 Kudos [?]: 14 [0], given: 24 Re: A firm's annual revenue grows twice as fast as its costs. In [#permalink] ### Show Tags 16 Apr 2014, 08:14 I am lost. Can't solve it. Kudos [?]: 14 [0], given: 24 Retired Moderator Joined: 20 Dec 2013 Posts: 185 Kudos [?]: 75 [0], given: 71 Location: United States (NY) GMAT 1: 640 Q44 V34 GMAT 2: 710 Q48 V40 GMAT 3: 720 Q49 V40 GPA: 3.16 WE: Consulting (Venture Capital) Re: A firm's annual revenue grows twice as fast as its costs. In [#permalink] ### Show Tags 17 Apr 2014, 22:26 tough one for sure. 3rd year revenue going up by 44% = 1st year revenue * (12^2/10^2) so 2nd year revenue is 1st year revenue * (12/10) --> 1st year revenue + 1st year revenue (2/10) so growth rate of revenue is 20% and costs is 10% _________________ Kudos [?]: 75 [0], given: 71 Senior Manager Joined: 08 Apr 2012 Posts: 445 Kudos [?]: 79 [0], given: 58 Re: A firm's annual revenue grows twice as fast as its costs. In [#permalink] ### Show Tags 17 Sep 2014, 14:29 SravnaTestPrep wrote: 1. Let the revenues and costs in 2007 be r1 and c1 respectively. We have r1-c1=-1000 2. Let revenues in 2008 be r2 and c2 respectively. We have r2-c2=0 3. Let revenues and costs in 2009 be r3 and c3 respectively. we have r3=1.44r1. 4. Since the growth rate of sales is constant, growth rate per year is 20%. growth rate of costs is half of that which is 10% 5. (2) can be written as 1.2 r1-1.1 c1=0 6. Solving for (1) and (5), we have c1=12000 andr1=11000 7. r3=1.44*11000= 15840 and c3=1.21*12000=14520 8. Therefore profit in 2009=15840-14520=1320 The answer should be$1320

Something is messing up my calculations.
I substituted the amount by which C and R go up with X.
This meant that at 2009 we needed to find out : R*x^4 - C*X^2.
Since X^4 = 1.44 -> X^2 = 1.2
And that's why I multiplied C by 1.2 and not 1.21.
Why is this wrong?

Kudos [?]: 79 [0], given: 58

Veritas Prep GMAT Instructor
Joined: 16 Oct 2010
Posts: 7743

Kudos [?]: 17834 [0], given: 235

Location: Pune, India
Re: A firm's annual revenue grows twice as fast as its costs. In [#permalink]

### Show Tags

17 Sep 2014, 22:15
ronr34 wrote:
SravnaTestPrep wrote:
1. Let the revenues and costs in 2007 be r1 and c1 respectively. We have r1-c1=-1000
2. Let revenues in 2008 be r2 and c2 respectively. We have r2-c2=0
3. Let revenues and costs in 2009 be r3 and c3 respectively. we have r3=1.44r1.
4. Since the growth rate of sales is constant, growth rate per year is 20%. growth rate of costs is half of that which is 10%
5. (2) can be written as 1.2 r1-1.1 c1=0
6. Solving for (1) and (5), we have c1=12000 andr1=11000
7. r3=1.44*11000= 15840 and c3=1.21*12000=14520
8. Therefore profit in 2009=15840-14520=1320

The answer should be $1320 Something is messing up my calculations. I substituted the amount by which C and R go up with X. This meant that at 2009 we needed to find out : R*x^4 - C*X^2. Since X^4 = 1.44 -> X^2 = 1.2 And that's why I multiplied C by 1.2 and not 1.21. Why is this wrong? C and R do not go up by the same rate X. You are given that revenue grows twice as fast as cost. So if rate of revenue growth is X, rate of cost growth is X/2. _________________ Karishma Veritas Prep | GMAT Instructor My Blog Get started with Veritas Prep GMAT On Demand for$199

Veritas Prep Reviews

Kudos [?]: 17834 [0], given: 235

Senior Manager
Joined: 03 Apr 2013
Posts: 276

Kudos [?]: 44 [0], given: 855

A firm's annual revenue grows twice as fast as its costs. In [#permalink]

### Show Tags

11 Jul 2016, 10:30
WoundedTiger wrote:
A firm's annual revenue grows twice as fast as its costs. In 2007 it operated at a \$1000 loss, it broke even in 2008, and in 2009 its revenues were 44% higher than in 2007. If the firm's revenues and costs grew at a constant rate over this period, what was its profit in 2009?

A. 700
B. 1000
C. 1300
D. 1600
E. 2000

I found this problem quite difficult to be solved under 2 mins. Will be really keen to know if there are any shortcuts to handle such Questions.
Would you rate this problem a 700 + ??

First of all..+1 for the question.
I got the right answer..but the only thing I felt eerie about this problem is that it has a lot of calculations to be done under the given timing constraints..Experts..please suggest something about the calculations this has. And what level would you classify this problem as..

_________________

Spread some love..Like = +1 Kudos

Kudos [?]: 44 [0], given: 855

Manager
Joined: 05 Jul 2016
Posts: 50

Kudos [?]: 10 [0], given: 129

Location: China
Concentration: Finance, Nonprofit
GMAT 1: 680 Q49 V33
GMAT 2: 690 Q51 V31
GMAT 3: 710 Q50 V36
GPA: 3.4
A firm's annual revenue grows twice as fast as its costs. In [#permalink]

### Show Tags

24 Jul 2016, 20:41
Profit=Revenue-Cost

2007:
-1000=R1-C1

2008:
0=(1+2X%)R1-(1+X%)C1

2009:
P3=(1+2X%)^2*R1-(1+X%)^2*C1

we've already known that R3=1.44R1, so (1+2X%)^2=1.44, X=10

we put X=10 back to the equation of 2008:
0=1.2R1-1.1C1, and we have 1.2R1=1.1C1, which we could combine with the equation of 2007.
Then we have C1=12000, R1-11000

Finally, take C1 and R1 into the equation of 2009 and we got P3=15840-14520=1320

Thanks,
_________________

It's better to burn out than to fade away.

Kudos [?]: 10 [0], given: 129

Non-Human User
Joined: 09 Sep 2013
Posts: 15576

Kudos [?]: 283 [0], given: 0

Re: A firm's annual revenue grows twice as fast as its costs. In [#permalink]

### Show Tags

15 Aug 2017, 01:12
Hello from the GMAT Club BumpBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

Want to see all other topics I dig out? Follow me (click follow button on profile). You will receive a summary of all topics I bump in your profile area as well as via email.
_________________

Kudos [?]: 283 [0], given: 0

Re: A firm's annual revenue grows twice as fast as its costs. In   [#permalink] 15 Aug 2017, 01:12
Display posts from previous: Sort by