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The profit earned by selling a commodity is generally given by the sel

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New post 09 May 2017, 12:10
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Source: Nova GMAT

The profit earned by selling a commodity is generally given by the selling price of the commodity minus the cost of the commodity. Each year, both the price and the cost increase for commodity A. By what percentage will the profit on commodity A grow next year?

(1) Next year, the cost of the commodity to retailers will increase by 9%.
(2) Next year, the selling price of the commodity by retailers will increase by 10%

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Re: The profit earned by selling a commodity is generally given by the sel  [#permalink]

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New post 09 May 2017, 12:33
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1. Since we know only the growth of the cost price, it is not possible to calculate the growth in profit. The reason is that we need both the growth of the cost and selling prices respectively(Insufficient)

2. Since we know only the growth of the selling price, it is not possible to calculate the growth in profit. The reason is that we need both the growth of the cost and selling prices respectively(Insufficient)

Combining both the statements, cost price of product increases from 1x to 1.09x and selling price increases from 1y to 1.10y.

Example 1
CP: 100(last year)
SP: 140(last year)
Profit: 40 or 40%

According to question stem
This year
CP : 109
SP : 154
Profit: 45 or 41.28%

Example 2
CP: 200(last year)
SP: 240(last year)
Profit: 40 or 20%

This year
CP : 218(increase of 9%)
SP : 288(increase of 10%)
Profit: 70 or 32.11%
We have different increase of profits for different CP and SP.
(Insufficient - Option E)
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Re: The profit earned by selling a commodity is generally given by the sel  [#permalink]

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New post 27 Jul 2017, 13:18
Hey abhimahna, got a question here, can you help?

Generally, we can get the answer to these kinds of Profit percentage increase questions when we are given increase in revenues and sales for both the years in percents (or ratios), right? Is the answer to this question E because we don't know the quantity of items sold despite knowing the cost and selling price increase? If we had known that, would that have been sufficient to answer the question?
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The profit earned by selling a commodity is generally given by the sel  [#permalink]

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New post 27 Jul 2017, 23:01
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TheMastermind wrote:
Hey abhimahna, got a question here, can you help?

Generally, we can get the answer to these kinds of Profit percentage increase questions when we are given increase in revenues and sales for both the years in percents (or ratios), right? Is the answer to this question E because we don't know the quantity of items sold despite knowing the cost and selling price increase? If we had known that, would that have been sufficient to answer the question?


Hi TheMastermind ,

I am happy to help. :)

Let me first decode this question for you.

We are given that Profit = SP - CP

We need to find out %increase in profit next year.

Or I can say we are asked to find out %Change = (New Profit - original Profit)/100

Since, I don't have information regarding next year, I cannot decode further.

Let's move on to the Statements now

(1) Next year, the cost of the commodity to retailers will increase by 9%.

Okay, It says CP will become 1.09CP.

I don't have any information regarding increase in SP. Hence, Insufficient.

(2) Next year, the selling price of the commodity by retailers will increase by 10%

Okay, It says SP will become 1.10SP.

I don't have any information regarding increase in CP. Hence, Insufficient.

Let's combine the two statement.

New Profit = New SP - New CP = 1.10SP - 1.09CP

Change in profit = New Profit - Original Profit = 1.10SP - 1.09CP - ( SP - CP) = 0.1 SP - 0.9 CP

Hence, %change = (0.1 SP - 0.9 CP)/100

Now, you have two different variables SP and CP and you don't have any information about them.

Hence, combining together is Insufficient. Hence, answer is E.

Now, let me answer a couple of other things:

Generally, we can get the answer to these kinds of Profit percentage increase questions when we are given increase in revenues and sales for both the years in percents (or ratios), right? -- NO MAN, this is not correct. You need to have some relationship between them and the value of one of them.

Is the answer to this question E because we don't know the quantity of items sold despite knowing the cost and selling price increase? If we had known that, would that have been sufficient to answer the question? -- NO, We are asked to find out profit % on commodity A. So, it will be considered a single unit. Assuming that there could be multiple things will do nothing more than making the things difficult.

Does that make sense?
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Re: The profit earned by selling a commodity is generally given by the sel  [#permalink]

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