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# Company Q plans to make a new product next year and sell each unit of

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Company Q plans to make a new product next year and sell each unit of  [#permalink]

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17 Jun 2017, 10:39
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Company Q plans to make a new product next year and sell each unit of this new product at a selling price of $2. The variable costs per unit in each production run are estimated to be 40% of the selling price, and the fixed costs for each production run are estimated to be$5,040. Based on these estimated costs, how many units of the new product will Company Q need to make and sell in order for their revenue to equal their total costs for each production run?

A. 4,200
B. 3,150
C. 2,520
D. 2,100
E. 1,800
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Posts: 60646
Re: Company Q plans to make a new product next year and sell each unit of  [#permalink]

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17 Jun 2017, 13:24
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AbdurRakib wrote:
Company Q plans to make a new product next year and sell each unit of this new product at a selling price of $2. The variable costs per unit in each production run are estimated to be 40% of the selling price, and the fixed costs for each production run are estimated to be$5,040. Based on these estimated costs, how many units of the new product will Company Q need to make and sell in order for their revenue to equal their total costs for each production run?

A. 4,200
B. 3,150
C. 2,520
D. 2,100
E. 1,800

The variable costs per unit = 0.4*2 = $0.8. So, we are left with$1.2.

Total Cost price = 5040 + 40% of selling price $2x $$5040 + \frac{40}{100} * 2x = 5040 + 0.8x$$ $$2x = 5040 + 0.8x$$ $$2x - 0.8 x =5040$$ $$1.2x = 5040$$ $$x = \frac{5040}{1.2} = 4,200$$ . Answer A... ##### General Discussion Retired Moderator Joined: 22 Aug 2013 Posts: 1398 Location: India Re: Company Q plans to make a new product next year and sell each unit of [#permalink] ### Show Tags 02 Jul 2017, 11:19 1 If company makes x units, Sp of those x units = 2x dollars Now we are given that 40% of this Sp is variable cost, and rest must be thus fixed cost of$5040. So $5040=60% of 2x =1.2x So x = 5040/1.2 = 4200 Hence A answer Posted from my mobile device Posted from my mobile device GMAT Club Legend Joined: 12 Sep 2015 Posts: 4228 Location: Canada Company Q plans to make a new product next year and sell each unit of [#permalink] ### Show Tags 22 Aug 2017, 07:12 3 Top Contributor AbdurRakib wrote: Company Q plans to make a new product next year and sell each unit of this new product at a selling price of$2. The variable costs per unit in each production run are estimated to be 40% of the selling price, and the fixed costs for each production run are estimated to be $5,040. Based on these estimated costs, how many units of the new product will Company Q need to make and sell in order for their revenue to equal their total costs for each production run? A. 4,200 B. 3,150 C. 2,520 D. 2,100 E. 1,800 Let x = number of units Company Q must make to break even So, 2x = REVENUE from selling x units As for EXPENSES, we have: Fixed cost = 5040 Variable cost = 40% of total selling price = 40% of 2x = (0.4)(2x) = 0.8x So, TOTAL EXPENSES = 5040 + 0.8x We want the revenue to equal the expenses. So, we want: 2x = 5040 + 0.8x Subtract 0.8x from both sides: 1.2x = 5040 At this point, we have several options to solve this equation. Here's one: Take: 1.2x = 5040 Rewrite 1.2 as fraction to get: (6/5)x = 5040 Multiply both sides by 5 to get: 6x ≈ 25,000 ASIDE: Since the answer choices are reasonably spread apart, it should be fine to use approximation Divide both sides by 6 to get: x ≈ 25,000/6 Since 24,000/6 = 4,000, we know that 25,000/6 = a number that's BIGGER THAN 4,000 Only one answer choice (A) is bigger than 4,000 Answer: RELATED VIDEO FROM OUR COURSE _________________ Test confidently with gmatprepnow.com Board of Directors Status: QA & VA Forum Moderator Joined: 11 Jun 2011 Posts: 4870 Location: India GPA: 3.5 WE: Business Development (Commercial Banking) Re: Company Q plans to make a new product next year and sell each unit of [#permalink] ### Show Tags 22 Aug 2017, 08:58 1 AbdurRakib wrote: Company Q plans to make a new product next year and sell each unit of this new product at a selling price of$2. The variable costs per unit in each production run are estimated to be 40% of the selling price, and the fixed costs for each production run are estimated to be $5,040. Based on these estimated costs, how many units of the new product will Company Q need to make and sell in order for their revenue to equal their total costs for each production run? A. 4,200 B. 3,150 C. 2,520 D. 2,100 E. 1,800  Total Cost = Fixed Cost + Variable CostOr, Total Cost = Fixed Cost + (Cost Price per unit x No of Units Produced) Here, Variable Cost is 0.8 So, Total Cost = 5040 + 0.80*n (Where n = Number of Units produced)  Total Revenue = No of Units Sold x Selling Price of each unit So, Total Revenue = 2n Quote: Based on these estimated costs, how many units of the new product will Company Q need to make and sell in order for their revenue to equal their total costs for each production run? $$5040 + 0.80n = 2n$$ Or, $$n = \frac{5040}{1.20}$$ Or, $$n = 4200$$ Hence, the correct answer must be (A) 4200 _________________ Thanks and Regards Abhishek.... PLEASE FOLLOW THE RULES FOR POSTING IN QA AND VA FORUM AND USE SEARCH FUNCTION BEFORE POSTING NEW QUESTIONS How to use Search Function in GMAT Club | Rules for Posting in QA forum | Writing Mathematical Formulas |Rules for Posting in VA forum | Request Expert's Reply ( VA Forum Only ) Target Test Prep Representative Status: Founder & CEO Affiliations: Target Test Prep Joined: 14 Oct 2015 Posts: 9143 Location: United States (CA) Re: Company Q plans to make a new product next year and sell each unit of [#permalink] ### Show Tags 24 Aug 2017, 16:06 1 2 AbdurRakib wrote: Company Q plans to make a new product next year and sell each unit of this new product at a selling price of$2. The variable costs per unit in each production run are estimated to be 40% of the selling price, and the fixed costs for each production run are estimated to be $5,040. Based on these estimated costs, how many units of the new product will Company Q need to make and sell in order for their revenue to equal their total costs for each production run? A. 4,200 B. 3,150 C. 2,520 D. 2,100 E. 1,800 Let’s let n = the number of units sold in order to break even. The variable cost per unit is 0.4 x 2 = 0.8; thus, the variable cost for n units is 0.8n. We know that the fixed cost is$5040 and the revenue is 2n. We can create the following equation, equating total cost to total revenue:

0.8n + 5,040 = 2n

5,040 = 1.2n

4,200 = n

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Re: Company Q plans to make a new product next year and sell each unit of  [#permalink]

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07 Nov 2017, 06:04
Did number testing. Is this method efficient here?
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Joined: 17 Aug 2016
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Re: Company Q plans to make a new product next year and sell each unit of  [#permalink]

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06 Nov 2018, 20:28
I also did number testing with regards to solving this question. Is it an efficient method to solve this question?
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Re: Company Q plans to make a new product next year and sell each unit of  [#permalink]

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07 Nov 2018, 07:48
Jeeva1989 wrote:
I also did number testing with regards to solving this question. Is it an efficient method to solve this question?

Hello

I think in this one, using arithemtic (as Bunuel or I have used in our solutions) would probably be better.

Although yes, we can apply same arithmetic funda by picking up numbers from the options. Whatever number of units company Q makes and sells, 60% of SP of those units should be equal to $5040, which is the fixed cost. And SP of each unit is$2, so 60% of that = $1.2. So lets pick up option C- 2520. But 2520*1.2 is not 5040, its less and also its in decimals. So we need a bigger value, lets pick up option A - 4200. 4200*1.2 = 5040, so this is correct. Option A. Intern Joined: 08 Nov 2018 Posts: 3 Re: Company Q plans to make a new product next year and sell each unit of [#permalink] ### Show Tags 05 May 2019, 04:40 Equate selling revenue = Total cost x-represents units sold variable cost = 0.4*$2 = $0.8 2x = 5040 + 0.8x x =$5040/1.2 = 4,200 units
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Company Q plans to make a new product next year and sell each unit of  [#permalink]

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06 May 2019, 01:26
2x=.8x+5040[total cost=fixed +variable cos]
(2*40%=.8)
=>1.2x=5040
=>x=5040/1.2=4200
So, 4200 units should be sold to equal the revenue with the cost of the production

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Joined: 03 Aug 2017
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Re: Company Q plans to make a new product next year and sell each unit of  [#permalink]

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03 Dec 2019, 07:38
AbdurRakib wrote:
Company Q plans to make a new product next year and sell each unit of this new product at a selling price of $2. The variable costs per unit in each production run are estimated to be 40% of the selling price, and the fixed costs for each production run are estimated to be$5,040. Based on these estimated costs, how many units of the new product will Company Q need to make and sell in order for their revenue to equal their total costs for each production run?

A. 4,200
B. 3,150
C. 2,520
D. 2,100
E. 1,800

If the SP = 2 $Given. 40% = Variable cost = 0.40*2 = 0.80$ per peice.
So money remaining to recover Fixed cost and Make profits = 2-0.80 = 1.20

fixed costs for each production run are estimated to be \$5,040.

Target question : Based on these estimated costs, how many units of the new product will Company Q need to make and sell in order for their revenue to equal their total costs for each production run?

So we need to find how many Units we need to produce to recover the Fixed cost as we don't want to earn profits but just need to break even,

=5040 /1.20 = 4200 Option A
Re: Company Q plans to make a new product next year and sell each unit of   [#permalink] 03 Dec 2019, 07:38
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