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• ### $450 Tuition Credit & Official CAT Packs FREE November 15, 2018 November 15, 2018 10:00 PM MST 11:00 PM MST EMPOWERgmat is giving away the complete Official GMAT Exam Pack collection worth$100 with the 3 Month Pack ($299) • ### Free GMAT Strategy Webinar November 17, 2018 November 17, 2018 07:00 AM PST 09:00 AM PST Nov. 17, 7 AM PST. Aiming to score 760+? Attend this FREE session to learn how to Define your GMAT Strategy, Create your Study Plan and Master the Core Skills to excel on the GMAT. # Each month, a certain manufacturing company's total expenses are equal  new topic post reply Question banks Downloads My Bookmarks Reviews Important topics Author Message TAGS: ### Hide Tags Math Expert Joined: 02 Sep 2009 Posts: 50585 Each month, a certain manufacturing company's total expenses are equal [#permalink] ### Show Tags 12 Jul 2018, 00:32 00:00 Difficulty: 45% (medium) Question Stats: 73% (01:48) correct 27% (02:24) wrong based on 33 sessions ### HideShow timer Statistics Each month, a certain manufacturing company's total expenses are equal to a fixed monthly expense plus a variable expense that is directly proportional to the number of units produced by the company during that month. If the company's total expenses for a month in which it produces 20,000 units are$570,000, and the total expenses for a month in which it produces 25,000 units are $705,000, what is the company's fixed monthly expense? A.$27,000

B. $30,000 C.$67,500

D. $109,800 E.$135,000

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Re: Each month, a certain manufacturing company's total expenses are equal  [#permalink]

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12 Jul 2018, 00:42
Bunuel wrote:
Each month, a certain manufacturing company's total expenses are equal to a fixed monthly expense plus a variable expense that is directly proportional to the number of units produced by the company during that month. If the company's total expenses for a month in which it produces 20,000 units are $570,000, and the total expenses for a month in which it produces 25,000 units are$705,000, what is the company's fixed monthly expense?

A. $27,000 B.$30,000

C. $67,500 D.$109,800

E. $135,000 We'll break our question into equations to make it easier to understand. This is a Precise appraoch. total expense = fixed monthly expense + variable expense --> t = f + ku (where k is a constant - we are told the variable expense in 'proportional to the amount of units) 570,000 = f + 20,000k 705,000 = f + 25,000k Looking at our equations, it is easy to see that a difference in 5,000 units created another 705,000 - 570,000 = 135,000 dollars of revenue. So 20,000 units must cost 135,000*4 = 540,000 dollars meaning that, from our first equation, the fixed cost is 570,000 - 540,000 = 30,000 (B) is our answer. _________________ Halloween SALE at exmaPAL! Save 25% on any GMAT/GRE course! Claim it today. Manager Joined: 13 Feb 2018 Posts: 135 Re: Each month, a certain manufacturing company's total expenses are equal [#permalink] ### Show Tags 12 Jul 2018, 03:27 We can observe that additional 5000 (25000-20000) items lead to$135 000 ($705000-$570000) increase.

So the total variable cost will be:
(20000/5000)*135000=540 000
(25000/5000)*135000=675 000

Fixed cost=Total cost - variable cost
570 000-540 000= 30 000
705 000- 675 000 = 30 000

In My Opinion
Ans: B
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Each month, a certain manufacturing company's total expenses are equal  [#permalink]

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14 Jul 2018, 12:13
Bunuel wrote:
Each month, a certain manufacturing company's total expenses are equal to a fixed monthly expense plus a variable expense that is directly proportional to the number of units produced by the company during that month. If the company's total expenses for a month in which it produces 20,000 units are $570,000, and the total expenses for a month in which it produces 25,000 units are$705,000, what is the company's fixed monthly expense?

A. $27,000 B.$30,000

C. $67,500 D.$109,800

E. $135,000 The trap is Answer A.$27 is the cost per unit.

That figure is used to calculate variable cost (variable cost total changes because the number of units produced changes)

Variable Cost = (Per unit cost) * (# of units)

Fixed Cost is a cost that does not change that is incurred with each and every production batch irrespective of number of units.

Fixed Cost = (Total Cost - Variable Cost)

(1) Total cost of "extra" units?
How many [relatively] extra units cost how much total?

Fixed cost + 25,000 units = $705,000 Fixed cost + 20,000 units =$570,000

Subtract bottom from top: 5,000 units cost $135,000 (2) Cost per unit: $$\frac{TotalCost}{No.Of.Units}=\frac{135,000}{5,000}=27$$ per unit Per unit cost is$27, but $27 per unit is above and beyond some fixed cost that is the same for every production batch. We need that fixed cost. (3) Fixed cost Fixed cost = Total cost - (Variable Cost) Pick one production batch. Doesn't matter which one. Variable Cost = (# of units) * (cost per unit =$27)

Variable Cost of 20,000 units:
$$(27 * 20,000) = 540,000$$

Total Cost of 20,000 units:$$570,000$$

Fixed Cost: $$(570,000 - 540,000) = 30,000$$

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Re: Each month, a certain manufacturing company's total expenses are equal  [#permalink]

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14 Jul 2018, 18:34
Bunuel wrote:
Each month, a certain manufacturing company's total expenses are equal to a fixed monthly expense plus a variable expense that is directly proportional to the number of units produced by the company during that month. If the company's total expenses for a month in which it produces 20,000 units are $570,000, and the total expenses for a month in which it produces 25,000 units are$705,000, what is the company's fixed monthly expense?

A. $27,000 B.$30,000

C. $67,500 D.$109,800

E. $135,000 Note: Fixed cost will not change regardless the number of units produced. ***** If amount changes , that change must be occurred because of Variable cost. Workings : For 20000 units total cost is 570000 for 25000 units total cost is 705000 *** For 5000 units cost is increased by 135000. This 135000 is your variable cost for 5000 units. Note: Fixed cost remains same in all condition. Variable cost per unit : 135000 / 5000 = 27 / unit. We know , Total cost = Fc + Vc 570000 = Fc + (20000*27)..........(vc = 27 / unit for 20000 units) 570000 - 540000 = Fc Fc = 30000. Thus the best answer is B. Math Expert Joined: 02 Aug 2009 Posts: 7029 Re: Each month, a certain manufacturing company's total expenses are equal [#permalink] ### Show Tags 14 Jul 2018, 19:00 Bunuel wrote: Each month, a certain manufacturing company's total expenses are equal to a fixed monthly expense plus a variable expense that is directly proportional to the number of units produced by the company during that month. If the company's total expenses for a month in which it produces 20,000 units are$570,000, and the total expenses for a month in which it produces 25,000 units are $705,000, what is the company's fixed monthly expense? A.$27,000

B. $30,000 C.$67,500

D. $109,800 E.$135,000

Since the expense are inclusive of a certain constant amount and variable expense, so the difference in cost will be the difference in cost of variables only..
So cost of 25000-20000=705000-570000=135000
Cost of 5000=135000, so cost of 5000*4 or 20000=135000*4=540000
If the variable cost of 20000 is 540000, the constant cost will be the remaining that is 570000-540000=30000

B
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Re: Each month, a certain manufacturing company's total expenses are equal &nbs [#permalink] 14 Jul 2018, 19:00
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