For Company A, did profit increase by more than 10%?

Question

1) This year's revenues increased by 10% compared to last year's revenues.
2) This year's costs increased by 5% compared to last year's costs.

greysniper7 · Answer

Both statements are clearly insufficient alone but together they are (take revenue=x and costs=y). The correct option is C.

achloes · Answer

Video solution by  ReedArnoldMPREP :

https://www.youtube.com/watch?v=Ppewbd4BiFw&t=3869s

lecremeglace · Answer

Answer here is actually E, I believe, as explained in the video. We would need to know the relationship between revenue and cost.

If they are close (let's say both $100), then the answer would be no, as the increases from both statements would result in an increase in profit of only 5%.
If they are far (let's say rev $100,000, and cost $10), then the answer would be yes, increase in profit is slightly greater than 10%.

Therefore, E.

achloes · Answer

The correct answer, according to the video solution, is C.

If both revenue AND costs increase by 10%, then we know that profit will also increase by 10% (for further info, check this question and video solution: https://gmatclub.com/forum/for-company- ... 14095.html)

But in this question, we are given that revenue increased by 10% while costs increased by only 5%. Therefore, because the relative difference (i.e. profit) between revenue and costs is more than the difference in the previous scenario, profit will have increased by more than 10%. Put in simple terms, the company was able to increase its revenue significantly while increasing its costs only a little, therefore its profit increased more than before.

JoeAa · Answer

I am with you. anyone can explain our falacy?

Bunuel · Answer

The red part is not correct. If both revenue and the cost are $100, then the profit last year was $0, and this year's profit is $5. So, the profit increased by more than 10%.

Last year's revenue = x;
Last year's cost = y;
Last year's profit = x - y.

This year's revenue = 1.1x;
This year's cost = 1.05y;
This year's profit = 1.1x - 1.05y.

The question is:
Is 1.1x - 1.05y > 1.1(x - y)?
Is 1.1x - 1.05y > 1.1x - 1.1y?
Is y > 0?

The answer to this is yes.

asmba · Answer

Bunuel : I don't understand this part: 
The question is:
Is 1.1x - 1.05y > 1.1(x - y)?
Is 1.1x - 1.05y > 1.1x - 1.1y?
Is y > 0?

Can you please explain??

Bunuel · Answer

Is  1.1x  - 1.05y >  1.1x  - 1.1y?

Above, 1.1x cancels out, and we get:

Is -1.05y > -1.1y?

Rearrange:

Is 1.1y - 1.05y > 0?

Is 0.05y > 0?

Reducing by 0.05 yields:

Is y > 0?

Hope it's clear.

Usernamevisible · Answer

Key learning
If revenue grows at x% and cost grows at less than x%, then profit grows at more than x%.

Yes, and that's exactly why this question is interesting.

In many DS questions, knowing only percentage changes in revenue and cost is **not sufficient** because the effect on profit depends on the starting values of revenue and cost.

For example:

Revenue = 100, Cost = 90 → Profit = 10

Revenue up 10%, Cost up 5%

New profit = 110 − 94.5 = 15.5

Profit increase = 55%

But:

Revenue = 1000, Cost = 100 → Profit = 900

Revenue up 10%, Cost up 5%

New profit = 1100 − 105 = 995

Profit increase ≈ 10.56%

Different starting values produce different profit increases.

So if the question were:

"By what percent did profit increase?"

or

"Did profit increase by more than 20%?"

then knowing only the percentage changes would generally be **not sufficient** because the answer depends on the original revenue and cost values.

---

Why is this question different?

The question asks:

"Did profit increase by more than 10%?"

Let's write the condition directly.

Last year's profit = R − C

This year's profit = 1.10R − 1.05C

We need:

1.10R − 1.05C > 1.10(R − C)

After simplifying:

0.05C > 0

Since cost must be positive, this is **always true**, regardless of the sizes of R and C.

---

The key insight

Usually, profit percentage change depends on both R and C, so magnitudes matter.

Here, the threshold in the question (**10%**) exactly matches the revenue growth rate (**10%**).

That causes all the R terms to cancel:

1.10R − 1.05C > 1.10R − 1.10C

and the result depends only on whether C > 0.

So although we do not know the absolute values of revenue and cost, we don't need them because the algebra eliminates them.

That's why this particular DS question is sufficient, whereas many other profit-growth DS questions are not.

ameya.satyawadi · Answer

I have a doubt in this question regarding even assuming that it is a profit what if the the article is sold at a loss then we can not say that we would have answered the question. The relationship between cost and revenue needs to be defined or at the least we should be at least provided that it gains profit rather than keeping it blank.  Bunuel  can you help me with this

For Company A, did profit increase by more than 10%?

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GMAT Data Sufficiency (DS) Questions

For Company A, did profit increase by more than 10%?

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