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# The Green Life company turned in a first-year profit of \$5,000.

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Manager
Joined: 03 Mar 2018
Posts: 206
The Green Life company turned in a first-year profit of \$5,000.  [#permalink]

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17 Apr 2018, 08:52
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Difficulty:

65% (hard)

Question Stats:

60% (01:53) correct 40% (02:09) wrong based on 100 sessions

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The Green Life company turned in a first-year profit of \$5,000. In its second year, its profit is \$8,000. If revenue grew 15% in that period while costs were constant, what were its second-year revenues?

(A) \$15,000
(B) \$20,000
(C) \$23,000
(D) \$26,500
(E) \$27,800

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Senior Manager
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Concentration: Marketing, Technology
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WE: Marketing (Telecommunications)
The Green Life company turned in a first-year profit of \$5,000.  [#permalink]

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17 Apr 2018, 08:59
1 year: Revenue - Cost = 5 000
- (minus)
2 year: Revenue*1.15 - Cost = 8 000
______________________________
Revenue = 20 000 => Revenue*1.15 = 23 000 . Answer (C)
Manager
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Re: The Green Life company turned in a first-year profit of \$5,000.  [#permalink]

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17 Apr 2018, 10:26
Interesting question with a common trap.
year 1: 5000 = S1-C where S1 is the selling price in year 1 and C is the cost price
Year2: 8000= S2-C where S2 is selling price in year 2 and C is the cost price.
From the question, C is same in both years and S2= 1.15 S1
So upon solving the above equations we obtain S1=20,000 (Option B ) Here is the trap!!!!!!
The question is asking for the selling price or revenue in year 2 but not in year 1.
So we need to calculate S2 = 1.15*20,000 = 23,000 (Option C)
Target Test Prep Representative
Affiliations: Target Test Prep
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Posts: 2816
Re: The Green Life company turned in a first-year profit of \$5,000.  [#permalink]

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19 Apr 2018, 17:56
1
2
itisSheldon wrote:
The Green Life company turned in a first-year profit of \$5,000. In its second year, its profit is \$8,000. If revenue grew 15% in that period while costs were constant, what were its second-year revenues?

(A) \$15,000
(B) \$20,000
(C) \$23,000
(D) \$26,500
(E) \$27,800

Since profit = revenue - cost, we can let r = 1st-year revenue and c = 1st-year cost. Thus 1.15r = 2nd-year revenue and c = 2nd-year cost and we can create the following two equations:

5,000 = r - c

c = r - 5000

and

8,000 = 1.15r - c

Substituting, we have:

8,000 = 1.15r - (r - 5000)

8000 = 1.15r - r + 5000

3000 = 0.15r

20,000 = r

Since the first-year revenue is \$20,000, the second-year revenue is 1.15 x 20,000 = \$23,000.

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Re: The Green Life company turned in a first-year profit of \$5,000.  [#permalink]

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02 May 2018, 06:33
S-C=5000. First year
S1-C=8000. Second year

S1=115*S/100

Two eqn solve
S=20,000

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Re: The Green Life company turned in a first-year profit of \$5,000.   [#permalink] 02 May 2018, 06:33
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