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.

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

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

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