It is currently 21 Oct 2017, 15:01

### 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

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

# Events & Promotions

###### Events & Promotions in June
Open Detailed Calendar

# The total cost for Company X to produce a batch of tools is

Author Message
TAGS:

### Hide Tags

VP
Joined: 22 Oct 2006
Posts: 1437

Kudos [?]: 196 [0], given: 12

Schools: Chicago Booth '11
The total cost for Company X to produce a batch of tools is [#permalink]

### Show Tags

25 Feb 2007, 21:50
8
This post was
BOOKMARKED
00:00

Difficulty:

5% (low)

Question Stats:

90% (02:19) correct 10% (01:34) wrong based on 1086 sessions

### HideShow timer Statistics

The total cost for Company X to produce a batch of tools is $10,000 plus$3 per tool. Each tool sells for $8. The gross profit earned from producing and selling these tools is the total income from sales minus the total production cost. If a batch of 20,000 tools is produced and sold, then Company X’s gross profit per tool is (A)$3.00
(B) $3.75 (C)$4.50
(D) $5.00 (E)$5.50

I keep getting an answer different from OA, and I know I must be missing something simple
[Reveal] Spoiler: OA

Last edited by Bunuel on 07 Apr 2012, 13:02, edited 2 times in total.
Edited the question and added the OA

Kudos [?]: 196 [0], given: 12

Manager
Joined: 12 Feb 2006
Posts: 115

Kudos [?]: 80 [0], given: 0

### Show Tags

26 Feb 2007, 02:13
I just did it real quickly and got 4.50.

Basically 90,000/20,000.

Kudos [?]: 80 [0], given: 0

Manager
Status: Post MBA, working in the area of Development Finance
Joined: 09 Oct 2006
Posts: 168

Kudos [?]: 3 [0], given: 1

Location: Africa

### Show Tags

26 Feb 2007, 05:05
[(8-3)xno. of tools - 10.000]/no of tools is the answer which is
90,000/20,000=4.5

Kudos [?]: 3 [0], given: 1

VP
Joined: 22 Oct 2006
Posts: 1437

Kudos [?]: 196 [0], given: 12

Schools: Chicago Booth '11

### Show Tags

26 Feb 2007, 13:26
oh I see what I did wrong, I ended up with 170,000 - 70,000 meaning I incoroprated the 10,000 in the profits, when it was only part of the cost

Thanks

Kudos [?]: 196 [0], given: 12

Manager
Joined: 15 Apr 2011
Posts: 70

Kudos [?]: 20 [0], given: 45

Re: The total cost for Company X to produce a batch of tools is [#permalink]

### Show Tags

07 Apr 2012, 12:53
Can someone explain this please? thanks.
_________________

Kudos [?]: 20 [0], given: 45

Math Expert
Joined: 02 Sep 2009
Posts: 41892

Kudos [?]: 129160 [3], given: 12194

Re: The total cost for Company X to produce a batch of tools is [#permalink]

### Show Tags

07 Apr 2012, 13:07
3
KUDOS
Expert's post
3
This post was
BOOKMARKED
Can someone explain this please? thanks.

The total cost for Company X to produce a batch of tools is $10,000 plus$3 per tool. Each tool sells for $8. The gross profit earned from producing and selling these tools is the total income from sales minus the total production cost. If a batch of 20,000 tools is produced and sold, then Company X’s gross profit per tool is (A)$3.00
(B) $3.75 (C)$4.50
(D) $5.00 (E)$5.50

The total production cost of 20,000 tools is $10,000 +$3*20,000 = $70,000; The total income from sales of 20,000 tools is$8*20,000 = $160,000; The gross profit earned is$160,000 - $70,000 =$90,000;
The gross profit per tool is $90,000/20,000 =$4.50.

Hope it's clear.
_________________

Kudos [?]: 129160 [3], given: 12194

Math Expert
Joined: 02 Sep 2009
Posts: 41892

Kudos [?]: 129160 [0], given: 12194

Re: The total cost for Company X [#permalink]

### Show Tags

07 May 2012, 00:31
sravanth wrote:
The total cost for Company X to produce a batch of tools is $10,000 plus$3 per tool. Each tool sells for $8. The gross profit earned from producing and selling these tools is the total income from sales minus the total production cost. If a batch of 20,000 tools is produced and sold, then Company X’s gross profit per tool is (A)$3.00
(B) $3.75 (C)$4.50
(D) $5.00 (E)$5.50

_________________

Kudos [?]: 129160 [0], given: 12194

Intern
Joined: 26 Nov 2011
Posts: 15

Kudos [?]: 1 [1], given: 0

Re: The total cost for Company X to produce a batch of tools is [#permalink]

### Show Tags

21 Jun 2012, 01:53
1
KUDOS
TC = 10,000 + 3x

TR = 8x

Profit = 8x - 10000 - 3x = 5x - 10000

when x = 20000, Profit = 90000

Profit per x = 90000/20000 = 4.5

terp26 wrote:
The total cost for Company X to produce a batch of tools is $10,000 plus$3 per tool. Each tool sells for $8. The gross profit earned from producing and selling these tools is the total income from sales minus the total production cost. If a batch of 20,000 tools is produced and sold, then Company X’s gross profit per tool is (A)$3.00
(B) $3.75 (C)$4.50
(D) $5.00 (E)$5.50

I keep getting an answer different from OA, and I know I must be missing something simple

Kudos [?]: 1 [1], given: 0

GMAT Club Legend
Joined: 09 Sep 2013
Posts: 16587

Kudos [?]: 273 [0], given: 0

Re: The total cost for Company X to produce a batch of tools is [#permalink]

### Show Tags

10 Jan 2014, 01:46
Hello from the GMAT Club BumpBot!

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.
_________________

Kudos [?]: 273 [0], given: 0

Manager
Joined: 12 Jan 2013
Posts: 218

Kudos [?]: 79 [0], given: 47

Re: The total cost for Company X to produce a batch of tools is [#permalink]

### Show Tags

10 Jan 2014, 01:50
terp26 wrote:
The total cost for Company X to produce a batch of tools is $10,000 plus$3 per tool. Each tool sells for $8. The gross profit earned from producing and selling these tools is the total income from sales minus the total production cost. If a batch of 20,000 tools is produced and sold, then Company X’s gross profit per tool is (A)$3.00
(B) $3.75 (C)$4.50
(D) $5.00 (E)$5.50

I keep getting an answer different from OA, and I know I must be missing something simple

Step 1) Create equations: [10,000 + 3*X = Total Cost] [5*X = Revenue] [Gross Profit = TC - R]

Step 2) Insert the variable: We are given X = 20,000 so Total cost = 70,000, Revenue = 160,000 and Gross Profit = 90,000

Now, the gross profit per tool is exactly what it says, Gross Profit/X ----> 90,000/20,000 ----> 4.5 USD per tool

Kudos [?]: 79 [0], given: 47

Manager
Joined: 07 Apr 2014
Posts: 138

Kudos [?]: 31 [0], given: 81

Re: The total cost for Company X to produce a batch of tools is [#permalink]

### Show Tags

11 Sep 2014, 06:43
terp26 wrote:
The total cost for Company X to produce a batch of tools is $10,000 plus$3 per tool. Each tool sells for $8. The gross profit earned from producing and selling these tools is the total income from sales minus the total production cost. If a batch of 20,000 tools is produced and sold, then Company X’s gross profit per tool is (A)$3.00
(B) $3.75 (C)$4.50
(D) $5.00 (E)$5.50

I keep getting an answer different from OA, and I know I must be missing something simple

production cost = 10000 + (3*20000 ) = 70000

selling cost = 20000* 8 = 160000

160000-70000 = 90000/20000 = 4.5

Kudos [?]: 31 [0], given: 81

Intern
Joined: 09 Sep 2014
Posts: 6

Kudos [?]: [0], given: 18

Re: The total cost for Company X to produce a batch of tools is [#permalink]

### Show Tags

11 Sep 2014, 08:02
This problem is simple but was hard for me at first. The way I ended up with a solution was seeing that each tool made $5 each and the 10,000 cost of production spread over 20,000 tools meant each tool had an additional cost of .50 making individual profit 4.50 per tool. Kudos [?]: [0], given: 18 GMAT Club Legend Joined: 09 Sep 2013 Posts: 16587 Kudos [?]: 273 [0], given: 0 Re: The total cost for Company X to produce a batch of tools is [#permalink] ### Show Tags 21 Dec 2015, 12:45 Hello from the GMAT Club BumpBot! 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. _________________ Kudos [?]: 273 [0], given: 0 Target Test Prep Representative Status: Founder & CEO Affiliations: Target Test Prep Joined: 14 Oct 2015 Posts: 1648 Kudos [?]: 848 [0], given: 3 Location: United States (CA) Re: The total cost for Company X to produce a batch of tools is [#permalink] ### Show Tags 07 Jun 2016, 10:56 terp26 wrote: The total cost for Company X to produce a batch of tools is$10,000 plus $3 per tool. Each tool sells for$8. The gross profit earned from producing and selling these tools is the total income from sales minus the total production cost. If a batch of 20,000 tools is produced and sold, then Company X’s gross profit per tool is

(A) $3.00 (B)$3.75
(C) $4.50 (D)$5.00
(E) $5.50 The problem first asks us to calculate the gross profit. The profit equation is as follows: Profit = Revenue – Cost In this particular case, we are given VARIABLE REVENUE and VARIABLE COST. This means that Company X makes a certain amount of revenue PER TOOL and has a certain cost PER TOOL. We also are given a FIXED COST. This is a cost that is constant and will not change. Thus we need to take into account the quantity of tools being produced and sold as well as the fixed cost. We can now generate a more detailed profit equation: Profit = (number of tools sold)(revenue per tool) – [fixed cost + (number of tools made)(cost per tool)] We are given the following: fixed cost =$10,000

cost per tool = $3 revenue per tool =$8

Number of tools produced and sold = 20,000

We can now plug all this into our profit equation:

Profit = (number of tools sold)(revenue per tool) – [fixed cost + (number of tools made)(cost per tool)]

P = 20,000 x 8 – [10,000 + (3 x 20,000)]

P = 20,000 x 8 – [10,000 + (3 x 20,000)]

P = 160,000 – [10,000 + 60,000]

P = 160,000 – 70,000

P = 90,000

We have a profit of $90,000 for selling 20,000 tools, but remember that we need to determine the profit PER TOOL. To calculate this, we divide the total profit of$90,000 by the number of tools produced, which is 20,000. We have:

$90,000/20,000 =$9/2 = $4.50 Answer C. _________________ Scott Woodbury-Stewart Founder and CEO GMAT Quant Self-Study Course 500+ lessons 3000+ practice problems 800+ HD solutions Kudos [?]: 848 [0], given: 3 Manager Joined: 20 Mar 2015 Posts: 64 Kudos [?]: 32 [0], given: 9 The total cost for Company X to produce a batch of tools is [#permalink] ### Show Tags 28 Jun 2016, 23:28 terp26 wrote: The total cost for Company X to produce a batch of tools is$10,000 plus $3 per tool. Each tool sells for$8. The gross profit earned from producing and selling these tools is the total income from sales minus the total production cost. If a batch of 20,000 tools is produced and sold, then Company X’s gross profit per tool is

(A) $3.00 (B)$3.75
(C) $4.50 (D)$5.00
(E) $5.50 Fixed cost =$10,000
Selling price is $8/tool and production cost is$3/tool.
$(8-3) =$5(Profit)

5*20,000 = $100,000$100,000-$10,000(FC) =$90,000(Gross profit.)

Gross profit/tool = $90,000/20,000 = 4.5 C. Kudos [?]: 32 [0], given: 9 Intern Joined: 29 Sep 2016 Posts: 7 Kudos [?]: 2 [1], given: 47 Re: The total cost for Company X to produce a batch of tools is [#permalink] ### Show Tags 15 Nov 2016, 15:55 1 This post received KUDOS We are trying to find out the profit per tool. Lets do this withou having to do a lot of math. Here is a simple way, we only divide once and the rest is given on the statement. The statement tells us the selling of each tool$8.00 now we need to get the cost. We already know that each tool has a fixed cost of $3.00 and each batch is$10,000.

The only thing we actually need to do here is take allocate the $10,000 to each tool and then add it to the$3.00 cost per tool stated.

Lets divided the cost of the batch per tool: 20,000/ $10,000 =$0.50 per tool.

Voila! We have $8.00 - ($3.00 + $0.50) =$4.50

Kudos [?]: 2 [1], given: 47

Manager
Joined: 12 Jun 2016
Posts: 218

Kudos [?]: 35 [1], given: 125

Location: India
WE: Sales (Telecommunications)
Re: The total cost for Company X to produce a batch of tools is [#permalink]

### Show Tags

15 Jul 2017, 07:33
1
KUDOS
Here's how this can be solved as well - If you prefer Algebra

Let n = Number of tools sold

Cost Price = 10,000 + 3n
Revenue = 8n
Gross profit = 8n - (10,000+3n) = 5n - 10,000

Gross Profit per tool = $$\frac{(5n-10,000)}{n}$$ = $$5 - \frac{10,000}{n}$$

Plugging in given

Profit per tool = $$5 - \frac{10,000}{20,000} = 5 - \frac{1}{2} = 4.5$$

_________________

My Best is yet to come!

Kudos [?]: 35 [1], given: 125

Manager
Joined: 07 Jun 2017
Posts: 110

Kudos [?]: 36 [0], given: 46

Location: India
Concentration: Technology, General Management
GMAT 1: 660 Q46 V38
GPA: 3.6
WE: Information Technology (Computer Software)
Re: The total cost for Company X to produce a batch of tools is [#permalink]

### Show Tags

19 Sep 2017, 23:24
another method,
for each tool making profit of $8 -$3 =$5(excluded with the initial cost of$10000)
for initial investment each tool cost is distributed with 10000/20000 = $0.5 so total profit =$5-$0.5 =$4.5
_________________

Regards,
Naveen
email: nkmungila@gmail.com
Please press kudos if you like this post

Kudos [?]: 36 [0], given: 46

Re: The total cost for Company X to produce a batch of tools is   [#permalink] 19 Sep 2017, 23:24
Display posts from previous: Sort by