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A magazine costs $1.00 per copy to produce. If $20,000 was taken in

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A magazine costs $1.00 per copy to produce. If $20,000 was taken in  [#permalink]

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New post 22 Feb 2018, 20:43
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A
B
C
D
E

Difficulty:

  35% (medium)

Question Stats:

75% (01:52) correct 25% (02:02) wrong based on 26 sessions

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A magazine costs $1.00 per copy to produce. If $20,000 was taken in  [#permalink]

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New post 22 Feb 2018, 21:58
Bunuel wrote:
A magazine costs $1.00 per copy to produce. If $20,000 was taken in for advertising in the magazine, how many copies at 75 cents per copy must be sold to make a profit of exactly $10,000?

(A) 10,000

(B) 20,000

(C) 25,000

(D) 35,000

(E) 40,000


Since the cost of producing 1 magazine is $1, to produce x magazine, we would need $x.

Part of this cost was recovered by advertising in the magazine, which was $20000
We need to make a profit of $10000, selling at $0.75 per magazine.

\((0.75x + $20000) - x = $10000\) -> \(0.25x = $10000\) -> \(x = 40000\)

Therefore, we would need to produce 40000 magazines to realize a profit of $10000(Option E)

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A magazine costs $1.00 per copy to produce. If $20,000 was taken in  [#permalink]

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New post 24 Feb 2018, 13:18
Bunuel wrote:
A magazine costs $1.00 per copy to produce. If $20,000 was taken in for advertising in the magazine, how many copies at 75 cents per copy must be sold to make a profit of exactly $10,000?

(A) 10,000

(B) 20,000

(C) 25,000

(D) 35,000

(E) 40,000

I think pushpitkc 's solution might be better, but if you can't "see" the equation, work backwards. The magazine has collected $20,000 for advertising. Call that "cost offset."

Start with C) 25,000 copies
Cost to produce: (25,000 * $1) = $25,000
Cost offset: -$20,000
TOTAL COST: ($25,000 - $20,000) = $5,000
TOTAL REVENUE: (25,000 * $0.75) = $18,750
PROFIT =(TR-TC) = ($18,750 - $5,000) = $13,750

Too high. We have too FEW copies.
Why? Cost to produce ($1) is higher than sell price ($0.75). (The $20K offset makes this possible.)
To decrease profit (from $13,750 to $10,000), we must increase costs.

That can be done only by producing more copies. Eliminate A and B.

Try Answer E because it is "rounder" than D.

40,000 copies?
Cost to produce: (40,000 * $1) = $40,000
Cost offset: $20,000
TOTAL COST:($40,000 - $20,000) = $20,000
TOTAL REVENUE: (40,000 * $0.75) = $30,000
PROFIT =(TR-TC) = ($30,000 - $20,000) = $10,000

That's a match.

Answer E
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A magazine costs $1.00 per copy to produce. If $20,000 was taken in   [#permalink] 24 Feb 2018, 13:18
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