GMAT Question of the Day - Daily to your Mailbox; hard ones only

It is currently 15 Dec 2018, 19:39

Close

GMAT Club Daily Prep

Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track
Your Progress

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.

Close

Request Expert Reply

Confirm Cancel
Events & Promotions in December
PrevNext
SuMoTuWeThFrSa
2526272829301
2345678
9101112131415
16171819202122
23242526272829
303112345
Open Detailed Calendar
  • $450 Tuition Credit & Official CAT Packs FREE

     December 15, 2018

     December 15, 2018

     10:00 PM PST

     11:00 PM PST

    Get the complete Official GMAT Exam Pack collection worth $100 with the 3 Month Pack ($299)
  • FREE Quant Workshop by e-GMAT!

     December 16, 2018

     December 16, 2018

     07:00 AM PST

     09:00 AM PST

    Get personalized insights on how to achieve your Target Quant Score.

The total amount of profits of Brandeburgh Bicycle Company (BBC) must

  new topic post reply Question banks Downloads My Bookmarks Reviews Important topics  
Author Message
TAGS:

Hide Tags

Senior Manager
Senior Manager
avatar
Joined: 10 Apr 2012
Posts: 269
Location: United States
Concentration: Technology, Other
GPA: 2.44
WE: Project Management (Telecommunications)
GMAT ToolKit User Premium Member
The total amount of profits of Brandeburgh Bicycle Company (BBC) must  [#permalink]

Show Tags

New post Updated on: 15 Jun 2018, 08:09
1
5
00:00
A
B
C
D
E

Difficulty:

  95% (hard)

Question Stats:

24% (02:50) correct 76% (02:28) wrong based on 243 sessions

HideShow timer Statistics

The total amount of profits of Brandeburgh Bicycle Company (BBC) must have increased dramatically over the last 5 years. After BBC developed a light and strong new material for its bicycles, total sales increased to twice what they were 5 years ago. Nevertheless, sales of certain types of bicycles, for which the new material is not used due to its high cost, have remained constant or, as is the case with bicycles for children, have decreased. Four years ago, sales of children’s bicycles constituted 30 percent of the total bicycle sales of BBC, and now they constitute barely 20 percent of all BBC’s sales.

Which of the following must be assumed in order for the assertion that the total amount of profits of BBC has increased dramatically over the last several years to be true?


(A) Increased sales always result in increased profits.
(B) BBC bicycles are not significantly more expensive than 5 years ago.
(C) Over the last 5 years, total sales of BBC racing bicycles did not decrease by more than 70 percent.
(D) Over the last 5 years, the average amount of profit gained by BBC per bicycle sale has decreased by less than 50 percent.
(E) The proportion of bicycle market occupied by bicycles of BBC has not decreased over the last 5 years.

Originally posted by guerrero25 on 11 Aug 2013, 02:46.
Last edited by Bunuel on 15 Jun 2018, 08:09, edited 1 time in total.
Renamed the topic, edited the question and added the OA.
Manager
Manager
avatar
Joined: 21 Aug 2012
Posts: 146
Concentration: General Management, Operations
Schools: HBS '19 (S)
GMAT 1: 740 Q49 V42
Re: The total amount of profits of Brandeburgh Bicycle Company (BBC) must  [#permalink]

Show Tags

New post 11 Aug 2013, 05:43
IMO A ... since the passage says

the total amount of profits of Brandeburgh Bicycle Company (BBC) must have increased dramatically over the last 5 years

because

total sales increased to twice what they were 5 years ago

hence it must be assumed that increased sales always increase profits (not considering the high cost of the new material)

please post OA ...
Intern
Intern
avatar
Joined: 30 Mar 2013
Posts: 22
Re: The total amount of profits of Brandeburgh Bicycle Company (BBC) must  [#permalink]

Show Tags

New post 11 Aug 2013, 09:57
3
1
The total amount of profits of Brandeburgh Bicycle Company (BBC) must have increased dramatically over the last 5 years. After BBC developed a light and strong new material for its bicycles, total sales increased to twice what they were 5 years ago. Nevertheless, sales of certain types of bicycles, for which the new material is not used due to its high cost, have remained constant or, as is the case with bicycles for children, have decreased. Four years ago, sales of children’s bicycles constituted 30 percent of the total bicycle sales of BBC, and now they constitute barely 20 percent of all BBC’s sales.

Which of the following must be assumed in order for the assertion that the total amount of profits of BBC has increased dramatically over the last several years to be true?
(A)Increased sales always result in increased profits. --- too strong (always) for assumption .An assumption is a mild statement
(B)BBC bicycles are not significantly more expensive than 5 years ago. -- That doesnt help knowing bicycles were expensive 5 yrs ago !
(C)Over the last 5 years, total sales of BBC racing bicycles did not decrease by more than 70 percent. ---out of scope ...Racing bicycle is not mentioned !
(D)Over the last 5 years, the average amount of profit gained by BBC per bicycle sale has decreased by less than 50 percent. ---correct see explanation below
(E)The proportion of bicycle market occupied by bicycles of BBC has not decreased over the last 5 years. -- the total market share of bicycles in not known ..and even if mkt share decreased , it could still have made greater profits !


The answer should be (D) -

Lets asssume P1 (profit 5 years ago) (we know there was profit as question stem says - increase profit substantially) and P2 (after 5 years)
Let sales 5 years ago be S , after 5 years it would have been be 2S (as sales doubled)

So now lets take case when P2 didnt not increase substantially and is equal to P1

(P1/S) - (P2/2S) / (P1/s) * 100 (CALCULATE %diff in profit per bicycle when P2=P1)

substitiute P2=P1

(P1/S) - (P1/2S) / (P1/s) * 100 = 50 %

so it proves to maintain same profit levels the average profit gain per bicycle should be 50 % of was 5 years ago . So we need profit per bicycle to descrease by
50 % for profit to increase !

hope this helps !
Intern
Intern
avatar
Joined: 20 Jun 2013
Posts: 6
Re: The total amount of profits of Brandeburgh Bicycle Company (BBC) must  [#permalink]

Show Tags

New post 12 Aug 2013, 02:35
Totally confused, help please. Assumptions questions are very tough for me. Any materials that can be recommended!!!
Intern
Intern
avatar
Joined: 30 Mar 2013
Posts: 22
Re: The total amount of profits of Brandeburgh Bicycle Company (BBC) must  [#permalink]

Show Tags

New post 12 Aug 2013, 07:28
To start with Powerscore CR bible and then Manhattan CR book for advanced concepts .
IF you Practice questions using tags "Assumptions" on GMAT forum it should be more than enough !
Intern
Intern
avatar
Joined: 08 Jul 2013
Posts: 7
GMAT Date: 11-18-2013
Re: The total amount of profits of Brandeburgh Bicycle Company (BBC) must  [#permalink]

Show Tags

New post 12 Aug 2013, 10:27
I think the ans is A, since the question revolves around increase and decrease of sales in various types of bicycles and also that there is profit.

If what shilpi says is right... are we expected to do so much of mathematics while solving a CR :(..

Please post the OA
Manager
Manager
avatar
Status: How easy it is?
Joined: 09 Nov 2012
Posts: 92
Location: India
Concentration: Operations, General Management
GMAT 1: 650 Q50 V27
GMAT 2: 710 Q49 V37
GPA: 3.5
WE: Operations (Other)
GMAT ToolKit User Reviews Badge
Re: The total amount of profits of Brandeburgh Bicycle Company (BBC) must  [#permalink]

Show Tags

New post 12 Aug 2013, 14:43
1
What is wrong with E?

If the profits have increased inspite of increase in cost (due to more expensive material used) then the market share must be greater than or equal to what it was 5 years ago.
Retired Moderator
User avatar
Joined: 15 Jun 2012
Posts: 1017
Location: United States
Premium Member
Re: The total amount of profits of Brandeburgh Bicycle Company (BBC) must  [#permalink]

Show Tags

New post 12 Aug 2013, 15:41
3
guerrero25 wrote:
The total amount of profits of Brandeburgh Bicycle Company (BBC) must have increased dramatically over the last 5 years. After BBC developed a light and strong new material for its bicycles, total sales increased to twice what they were 5 years ago. Nevertheless, sales of certain types of bicycles, for which the new material is not used due to its high cost, have remained constant or, as is the case with bicycles for children, have decreased. Four years ago, sales of children’s bicycles constituted 30 percent of the total bicycle sales of BBC, and now they constitute barely 20 percent of all BBC’s sales.

Which of the following must be assumed in order for the assertion that the total amount of profits of BBC has increased dramatically over the last several years to be true?
(A)Increased sales always result in increased profits.
(B)BBC bicycles are not significantly more expensive than 5 years ago.
(C)Over the last 5 years, total sales of BBC racing bicycles did not decrease by more than 70 percent.
(D)Over the last 5 years, the average amount of profit gained by BBC per bicycle sale has decreased by less than 50 percent.
(E)The proportion of bicycle market occupied by bicycles of BBC has not decreased over the last 5 years.

I am finding the argument difficult to understand appreciate if some one could explain. I will post the OA soon.


Hi guerrero25 and nitin. I'm glad to help.

This question is tough, it requires you to have some business knowledges.

ANALYZE THE STIMULUS:

Fact: Total sales increased to twice what they were 5 years ago. KEY WORD: sales increased twice or 200%.
Fact: Sales of certain types of bicycles, for which the new material is not used have remained constant or have decreased.
Conclusion: The total amount of profits of BBC must have increased dramatically over the last 5 years.

Two important formulas:

KEY FORMULA #1: PROFIT MARGIN = TOTAL PROFIT / SALES
KEY FORMULA #2: TOTAL PROFIT = PROFIT MARGIN x SALES


Analyze the case by using example:
Before: Sales: 100; profits: 10 ==> profit margin = profits/sales = 10/100 = 0.1
After 5 years: Sales: 200 (twice); profit: x ==> profit margin = profits/sales = x/200

In order to conclude Total profit (X) increased dramatically,
(1) X must be greater than 10
--OR—
(2) initial ratio profits/sales = 10/100 must reduce less than 50%.

If it reduces greater than 50% (say reduces 60%) to 0.1*(100% - 60%) = 0.04.
Thus, total profit = profits margin ratio x Sales = 0.04 x 200 = 8 < 10. The conclusion fails.

ANALYZE EACH ANSWER:

(A)Increased sales always result in increased profits.
Wrong. Sales increases but profit margin decreases ==> total profit decreases. (see formulas above)

(B)BBC bicycles are not significantly more expensive than 5 years ago.
Wrong. Does not help. Why type of bicycle does not increase price? The one used new material or the one not used new material? You don’t know ==> What if bicycles that are used material do not increase prices (but their costs are high)  Total profit may decrease.

(C)Over the last 5 years, total sales of BBC racing bicycles did not decrease by more than 70 percent.
Wrong. The stimulus clearly says total sales increase twice, so option is meaningless.

(D)Over the last 5 years, the average amount of profit gained by BBC per bicycle sale has decreased by less than 50 percent.
Correct. As stated above. If profit margin reduces less than 50%, but total sale increases 200% ==> total profit increases for sure.

(E)The proportion of bicycle market occupied by bicycles of BBC has not decreased over the last 5 years.
Wrong. TEMPTING. Although the market share of BBC has not decreased, total profit may decrease if profit margin reduces. (See formulas above)

Hope it helps
_________________

Please +1 KUDO if my post helps. Thank you.

"Designing cars consumes you; it has a hold on your spirit which is incredibly powerful. It's not something you can do part time, you have do it with all your heart and soul or you're going to get it wrong."

Chris Bangle - Former BMW Chief of Design.

Non-Human User
User avatar
Joined: 01 Oct 2013
Posts: 3523
Premium Member
Re: The total amount of profits of Brandeburgh Bicycle Company (BBC) must  [#permalink]

Show Tags

New post 04 Jul 2018, 07:52
Hello from the GMAT Club VerbalBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

Want to see all other topics I dig out? Follow me (click follow button on profile). You will receive a summary of all topics I bump in your profile area as well as via email.
_________________

-
April 2018: New Forum dedicated to Verbal Strategies, Guides, and Resources

GMAT Club Bot
Re: The total amount of profits of Brandeburgh Bicycle Company (BBC) must &nbs [#permalink] 04 Jul 2018, 07:52
Display posts from previous: Sort by

The total amount of profits of Brandeburgh Bicycle Company (BBC) must

  new topic post reply Question banks Downloads My Bookmarks Reviews Important topics  


Copyright

GMAT Club MBA Forum Home| About| Terms and Conditions and Privacy Policy| GMAT Club Rules| Contact| Sitemap

Powered by phpBB © phpBB Group | Emoji artwork provided by EmojiOne

Kindly note that the GMAT® test is a registered trademark of the Graduate Management Admission Council®, and this site has neither been reviewed nor endorsed by GMAC®.