Let's begin by giving you everything you need to think about this problem correctly. This is a classic question that illustrates the difference between "

percentage of" and "

percentage change". In order to solve this question, you need to understand both of these ideas.

The leverage phrase "percentage of" requires the use of the formula

\(Amount = (\frac{\%}{100})Total\)The leverage phrase "percentage change" requires the use of the formula

\(V_{Final}=V_{Initial}(1+\frac{\%}{100})\) Let's take a look at a couple of ways to attack this problem:

METHOD 1: DOING THE MATHThe question asks for a percentage change, where the initial value (or \(V_{Initial}\)) is "7 percent

of" the revenue, or \(\frac{7}{100}R\). (In this case, \(R\) represents the revenue of last month.)

The question then tells us that the final value (or \(V_{Final}\)) is "5 percent

of" of the month's revenue, but the month's revenue

increased by 20% (indicating a percentage change in the revenue from last month to this month.) Thus, \(R_{Final}=R(1+\frac{1}{5})\). This month's bonus would therefore be \(\frac{5}{100}*R(\frac{6}{5})=(\frac{6}{100})R\). (Notice how, by translating the decimals into fractions, the math simplifies very quickly. I like to tell my classes "

Fractions Are Your Friends.")

Once we plug these values into our percentage change formula, the math turns out to be quite easy:

\(V_{Final}=V_{Initial}(1+\frac{\%}{100})\)

\(\frac{6}{100}*R=(\frac{7}{100})R(1+\frac{\%}{100})\)

\(\frac{6}{7}*R=R(1+\frac{\%}{100})\)

\(\frac{6}{7}=1+\frac{\%}{100}\)

\(-\frac{1}{7}=\frac{\%}{100}\)

Now, don't actually do the long division here. This would just be a time-killer. If you look down at the answer choices, it is very easy to see what correct answer is. \(-\frac{1}{7}\) is clearly negative, which eliminates answer choices

C,

D, and

E. And \(-2\%\) (or \(-\frac{1}{50}\)) is clearly going to be too small. Answer choice

B can be quickly eliminated. (Leveraging your answer choices against each other is often quicker than doing messy math!)

The answer is A.

METHOD 2: EASY NUMBERSBecause this problem gives you percentages and percentage changes without ever defining revenue totals, you can invent your own value for the revenue amounts. This turns the abstract algebra into concrete numbers that lend themselves to rapid calculation.

Because we are dealing with

percentages in this question, a natural possibility for our imaginary revenue is \(100\). If \(R=100\), then "7 percent

of" the revenue would be \(7\).

The percentage

increase from month to month is 20%. Thus, if last month's revenue was \(100\), then this month's would be \(100 (1+1/5) = 120\).

The revenue paid on this month is "5 percent

of" the increased revenue (in this case, \(120\)). Since 5% is equal to \(\frac{1}{20}\), the new revenue would be: \((120)(\frac{1}{20}) = 6\).

Now we just plug these into the percentage change formula from above:

\(V_{Final}=V_{Initial}(1+\frac{\%}{100})\)

\(6=7(1+\frac{\%}{100})\)

\(\frac{6}{7}=1+\frac{\%}{100}\)

\(-\frac{1}{7}=\frac{\%}{100}\)

Once again, we can look down at the answer choices to avoid doing this long division. Eliminating answer choices that don't work is often a faster strategy than doing unnecessary math. Answers

C,

D, and

E are positive, and answer choice

B is too small. No matter how you solve this question,

the answer is A.

_________________

Aaron J. Pond

Veritas Prep Elite-Level Instructor

Hit "+1 Kudos" if my post helped you understand the GMAT better.

Look me up at https://www.veritasprep.com/gmat/aaron-pond/ if you want to learn more GMAT Jujitsu.