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Greg’s Goosebumps produces Halloween items. Greg’s production costs co

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Greg’s Goosebumps produces Halloween items. Greg’s production costs co [#permalink] New post   30 May 2017, 11:40
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Greg’s Goosebumps produces Halloween items. Greg’s production costs consist of annual fixed costs totaling $120,000 and variable costs averaging $4 per item. If Greg’s selling price per item is $20, how many items must he produce and sell to earn an annual profit of $200,000?

(A) 20,000
(B) 15,000
(C) 3,333
(D) 5,000
(E) 1,333
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Re: Greg’s Goosebumps produces Halloween items. Greg’s production costs co [#permalink] New post   30 May 2017, 12:08
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cost price + profit = selling price

120,000 + 4n + 200,000 = 20n

16n = 320,000
n = 20,000 (A)
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Re: Greg’s Goosebumps produces Halloween items. Greg’s production costs co [#permalink] New post   30 May 2017, 12:11
Let x be the items being produced
CP = 4x
SP = 20x
Profit = 16x
Since the fixed cost of 120000 needs be recovered along with making a 200000$ profit, the total profit that needs to be made is 320000$

16x = 320000
x = 20000 items(Option A)
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Greg’s Goosebumps produces Halloween items. Greg’s production costs co [#permalink] New post   01 Jun 2017, 09:34
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Kritesh wrote:
Greg’s Goosebumps produces Halloween items. Greg’s production costs consist of annual fixed costs totaling $120,000 and variable costs averaging $4 per item. If Greg’s selling price per item is $20, how many items must he produce and sell to earn an annual profit of $200,000?

(A) 20,000
(B) 15,000
(C) 3,333
(D) 5,000
(E) 1,333


I couldn't "see" the equation within 20 seconds, though I knew I was close. I decided to test values where x = the number of items to be produced and sold.

Option C looks less than fun.

1. Start with D, where x = 5000

Total cost (TC): $120,000 + ($4)*(5,000) = $140,000

Total revenue (TR): ($20)*(5,000) = $100,000

Gross profit = (TR - TC) = -$40,000 ... So x = 5,000 is much too small.

2. Try A, x = 20,000

TC: $120,000 + ($4)*(20,000) = $200,000

TR: ($20)*(20,000) =$400,000

$400,000 - $200,000 = $200,000 profit. Correct.

Answer A
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Greg’s Goosebumps produces Halloween items. Greg’s production costs co [#permalink] New post   Updated on: 17 Jan 2019, 21:52
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Solution



Given:
    • Greg’s production costs includes of annual fixed costs and variable costs.
    • Annual fixed costs = $120,000
    • Variable costs= $4 per item.
    • Greg’s selling price per item = $20

To find:
    • The number of items, Greg’s must produce and sell to earn an annual profit of $200,000

Approach and Working
    • Production cost= Fixed cost+ Variable cost
      o Product cost= 120,000+ 4*n, where n is the number of item produced.

    • Selling price of n items= 20*n
    • Profit = 200,000
    • 20*n - (120,000 + 4*n) = 200,000
    • 16 * n = 320,000
    • n = 20,000

Correct answer: Option A

Originally posted by EgmatQuantExpert on 28 Oct 2018, 14:21.
Last edited by EgmatQuantExpert on 17 Jan 2019, 21:52, edited 1 time in total.
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Re: Greg’s Goosebumps produces Halloween items. Greg’s production costs co [#permalink] New post   17 Jan 2019, 18:51
EgmatQuantExpert wrote:

Solution



Given:
    • Greg’s production costs includes of annual fixed costs and variable costs.
    • Annual fixed costs = $120,000
    • Variable costs= $4 per item.
    • Greg’s selling price per item = $20

To find:
    • The number of items, Greg’s must produce and sell to earn an annual profit of $200,000

Approach and Working
    • Production cost= Fixed cost+ Variable cost
      o Product cost= 120,000+ 4*n, where n is the number of item produced.

    • Selling price of n items= 20*n
    • Profit = 200,000
    • 20*n- 120,000+ 4*n = 200,000
    • 16n= 320,000
    • N= 20,000

Correct answer: Option A


Hello EgmatQuantExpert !

• Selling price of n items= 20*n
• Profit = 200,000
• 20*n- (120,000+ 4*n) = 200,000
20*n -120,000 - 4*n)
• 16n= 320,000
• N= 20,000[/list]

I guess it should be inside the parenthesis, right?

Kind regards!
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Re: Greg’s Goosebumps produces Halloween items. Greg’s production costs co [#permalink] New post   17 Jan 2019, 21:53
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jfranciscocuencag wrote:

Hello EgmatQuantExpert !

• Selling price of n items= 20*n
• Profit = 200,000
• 20*n- (120,000+ 4*n) = 200,000
20*n -120,000 - 4*n)
• 16n= 320,000
• N= 20,000[/list]

I guess it should be inside the parenthesis, right?

Kind regards!


Hi,

Thanks for pointing it out. We missed the parenthesis, but the answer remains the same.

Regards,
GMAT Club Bot
gmatclubot
Re: Greg’s Goosebumps produces Halloween items. Greg’s production costs co [#permalink]
17 Jan 2019, 21:53
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