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Magoosh GMAT Instructor
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ACME’s manufacturing costs for sets of horseshoes
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14 Feb 2013, 11:19
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82% (02:03) correct 18% (02:09) wrong based on 180 sessions
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ACME’s manufacturing costs for sets of horseshoes include a $11,450 initial outlay, and $19.75 per set. They can sell the sets $52.50. If profit is revenue from sales minus manufacturing costs, and the company produces & sells 987 sets of horseshoes, what was their profit? (A) $20,874.25 (B) $30,943.25 (C) $41,308.50 (D) $51,817.50 (E) $53,624.25Unless you're Johannes Kepler or Will Hunting, you probably would not be able to do that exact calculation in your head, and of course you get no calculator on the GMAT. With estimation, though, this is a remarkably simple question. For more on the power of estimation on the GMAT, as well as an elegant solution to this question, see: http://magoosh.com/gmat/2012/thepower ... matquant/Experts, what wisdom and specific tips would you like to share about estimation on the GMAT Quantitative section? Mike
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Re: ACME’s manufacturing costs for sets of horseshoes
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14 Feb 2013, 12:12
its A since options are not so close we can solve this by uniting calculation and guessing total sales will be bit lower than 52500 from that initial outlay will get deducted 11500 so we left with 41000 variable cost say 20 X 1000 = 20000 will be deducted so finally we left with 21000 since we have considered the price greater than it actually is, the correct answer will certainly not cross the threshold of 21000. @Mike Sir Thanks for sharing the link. Regards, Abhijit
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Re: ACME’s manufacturing costs for sets of horseshoes
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13 Aug 2014, 21:45
mikemcgarry wrote: ACME’s manufacturing costs for sets of horseshoes include a $11,450 initial outlay, and $19.75 per set. They can sell the sets $52.50. If profit is revenue from sales minus manufacturing costs, and the company produces & sells 987 sets of horseshoes, what was their profit? (A) $20,874.25 (B) $30,943.25 (C) $41,308.50 (D) $51,817.50 (E) $53,624.25Unless you're Johannes Kepler or Will Hunting, you probably would not be able to do that exact calculation in your head, and of course you get no calculator on the GMAT. With estimation, though, this is a remarkably simple question. For more on the power of estimation on the GMAT, as well as an elegant solution to this question, see: http://magoosh.com/gmat/2012/thepower ... matquant/Experts, what wisdom and specific tips would you like to share about estimation on the GMAT Quantitative section? Mike The OA in this problem have a great variation; so we can use approximation\(19.75 \approx {20}\) \(52.50 \approx {50}\) \(987 \approx {1000}\) Total Cost Price\(= 11450 + 20*1000 \approx{31000}\) Total Sell Price \(= 1000*50 \approx {50000}\) \(Profit \approx {20000}\) Answer = A
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Re: ACME’s manufacturing costs for sets of horseshoes
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26 Apr 2018, 05:14
mikemcgarry wrote: ACME’s manufacturing costs for sets of horseshoes include a $11,450 initial outlay, and $19.75 per set. They can sell the sets $52.50. If profit is revenue from sales minus manufacturing costs, and the company produces & sells 987 sets of horseshoes, what was their profit? (A) $20,874.25 (B) $30,943.25 (C) $41,308.50 (D) $51,817.50 (E) $53,624.25
Here's a slight twist: It COSTS $19.75 per set, and each set is SOLD for $52.50 So, the company makes approximately $33 per set ($52.50  $19.75 ≈ $33) The company sold 987 sets. So, the profit ≈ ($33)(1000) ≈$33,000 Keep in mind, that there's also the initial outlay of $11,450 So, the TOTAL PROFIT ≈$33,000  $11,450 ≈ $21,500 The best (closest) answer is A Cheers, Brent
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Re: ACME’s manufacturing costs for sets of horseshoes
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19 Sep 2018, 19:22
mikemcgarry wrote: ACME’s manufacturing costs for sets of horseshoes include a $11,450 initial outlay, and $19.75 per set. They can sell the sets $52.50. If profit is revenue from sales minus manufacturing costs, and the company produces & sells 987 sets of horseshoes, what was their profit? (A) $20,874.25 (B) $30,943.25 (C) $41,308.50 (D) $51,817.50 (E) $53,624.25
The alternative choices ARE far apart (except the last two ones), therefore we are allowed to use (always carefully!) approximations (to be reconsidered ONLY if we come close to $50,000) !! \(? = {\rm{revenue}}  {\rm{costs}}\,\,\,\,\,\,\left( {{\rm{987}}\,\,{\rm{sets}}} \right)\) \({\rm{revenue}} = 987\,\,sets\,\,\left( {{{\$ 52{1 \over 2}} \over {1\,\,{\rm{set}}}}} \right)\,\,\,\, \cong \,\,\,\$ 990 \cdot 52\) \({\rm{costs}}\,\,\,{\rm{ = }}\,\,\,{\rm{11450 + }}987\,\,sets\,\,\left( {{{\$ 19{3 \over 4}} \over {1\,\,{\rm{set}}}}} \right)\,\,\,\, \cong \,\,\,\$ \left( {11450 + 990 \cdot 20} \right)\) \(? \cong \,10 \cdot 99 \cdot \left( {52  20} \right)  11450 \cong 10 \cdot 100 \cdot 32  11450 \cong 21000\,\,\left( \$ \right)\) This solution follows the notations and rationale taught in the GMATH method. Regards, fskilnik.
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Re: ACME’s manufacturing costs for sets of horseshoes
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02 Oct 2018, 18:24
mikemcgarry wrote: ACME’s manufacturing costs for sets of horseshoes include a $11,450 initial outlay, and $19.75 per set. They can sell the sets $52.50. If profit is revenue from sales minus manufacturing costs, and the company produces & sells 987 sets of horseshoes, what was their profit? (A) $20,874.25 (B) $30,943.25 (C) $41,308.50 (D) $51,817.50 (E) $53,624.25 The profit is: 987(52.50)  [11,450 + 987(19.75)] 987(52.50)  11,450  987(19.75) 987(52.50  19.75)  11,450 987(32.75)  11,450 At this point, we will approximate 987 as 1,000 and 32.75 as 32. So the approximate total profit is: 1,000(32)  11,450 32,000  11,450 20,550 We see that this is closest to 20,874.25 in choice A. Alternate Solution: Let’s round all the numbers. From the final statement of the problem, we know we’ll sell about 1,000 sets. The initial outlay is about 12,000 and manufacturing costs are about (20) (1000) = 20,000. Thus, costs are about 32,000. Revenue is a bit greater than (50)(1000) = 50,000. Thus, revenue  cost = 50,000  32,000 = 18,000. Thus, profit is a bit greater than $18,000. Answer: A
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