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# The total cost of producing item X is equal to the sum of

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Intern
Joined: 22 Apr 2008
Posts: 35
The total cost of producing item X is equal to the sum of  [#permalink]

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11 Aug 2008, 01:35
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The total cost of producing item X is equal to the sum of item X's fixed cost and variable cost. If the variable cost of producing X decreased by 5% in January, by what percent did the total cost of producing item X change in January?

(1) The fixed cost of producing item X increased by 13% in January.

(2) Before the changes in January, the fixed cost of producing item X was 5 times the variable cost of producing item X.

Total = Fixed + Variable .... given

Variable (new) = 0.95 Variable (old)

Stmt 1 - is not suff individual % changes in Fixed and Variable is not suff to cal % change in Total

Total ( new) = 1.13 Fixed(old) + 0.95 Variable(old)

% change = ( Total (new) - Total (old) )/ Total (old)

above cannot be cal hence not poss

Stmt 2

Fixed (old) = 5*Varaible (old)

Hence Total (old) = 6 Variable (old)

Total(new) = 6 *0.95 * Variable(old)

using Total (new) and Total (old) we can calculate % change...

Hence B

Is above reasoning correct?

Thanks

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Senior Manager
Joined: 06 Apr 2008
Posts: 390

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11 Aug 2008, 01:50
sjgmat wrote:
The total cost of producing item X is equal to the sum of item X's fixed cost and variable cost. If the variable cost of producing X decreased by 5% in January, by what percent did the total cost of producing item X change in January?

(1) The fixed cost of producing item X increased by 13% in January.

(2) Before the changes in January, the fixed cost of producing item X was 5 times the variable cost of producing item X.

Total = Fixed + Variable .... given

Variable (new) = 0.95 Variable (old)

Stmt 1 - is not suff individual % changes in Fixed and Variable is not suff to cal % change in Total

Total ( new) = 1.13 Fixed(old) + 0.95 Variable(old)

% change = ( Total (new) - Total (old) )/ Total (old)

above cannot be cal hence not poss

Stmt 2

Fixed (old) = 5*Varaible (old)

Hence Total (old) = 6 Variable (old)

Total(new) = 6 *0.95 * Variable(old)

using Total (new) and Total (old) we can calculate % change...

Hence B

Is above reasoning correct?

Thanks

OA is rightly C) because statement 2) talks about before changes in January and Q is percent variation after changes in January.

Therefore you need both 1) and 2)
Intern
Joined: 22 Apr 2008
Posts: 35

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11 Aug 2008, 01:58
nmohindru wrote:
sjgmat wrote:
The total cost of producing item X is equal to the sum of item X's fixed cost and variable cost. If the variable cost of producing X decreased by 5% in January, by what percent did the total cost of producing item X change in January?

(1) The fixed cost of producing item X increased by 13% in January.

(2) Before the changes in January, the fixed cost of producing item X was 5 times the variable cost of producing item X.

Total = Fixed + Variable .... given

Variable (new) = 0.95 Variable (old)

Stmt 1 - is not suff individual % changes in Fixed and Variable is not suff to cal % change in Total

Total ( new) = 1.13 Fixed(old) + 0.95 Variable(old)

% change = ( Total (new) - Total (old) )/ Total (old)

above cannot be cal hence not poss

Stmt 2

Fixed (old) = 5*Varaible (old)

Hence Total (old) = 6 Variable (old)

Total(new) = 6 *0.95 * Variable(old)

using Total (new) and Total (old) we can calculate % change...

Hence B

Is above reasoning correct?

Thanks

OA is rightly C) because statement 2) talks about before changes in January and Q is percent variation after changes in January.

Therefore you need both 1) and 2)

Thats correct we are given relation between Fixed and Variable cost before January, but 5% change in Variable is after January

So while calculating Total(new) I am considering 5% decrease in cost of Variable.

If I am not mistaken, you mean to say that I can't consider the relation between Fixed and Variable cost after January??

I am sorry but I am still unable to understand why OA - C

can you please explain with some details/examples

Thanks a lot
Senior Manager
Joined: 06 Apr 2008
Posts: 390

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11 Aug 2008, 02:15
sjgmat wrote:
Thats correct we are given relation between Fixed and Variable cost before January, but 5% change in Variable is after January

So while calculating Total(new) I am considering 5% decrease in cost of Variable.

If I am not mistaken, you mean to say that I can't consider the relation between Fixed and Variable cost after January??

I am sorry but I am still unable to understand why OA - C

can you please explain with some details/examples

Thanks a lot

No what I mean is you have to consider changes in January for fixed cost as well. These changes are given in statement 1) so statement 1) is required
Intern
Joined: 10 Aug 2008
Posts: 21
Schools: Emory Goizueta (Class of 2013)
WE 1: Management consultant
WE 2: Marketing consultant

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11 Aug 2008, 07:25
Agree. Choosing B means that you assume the fixed cost remains unchanged in January. However, there is no stated evidence for such case.

--== Message from GMAT Club Team ==--

This is not a quality discussion. It has been retired.

If you would like to discuss this question please re-post it in the respective forum. Thank you!

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Re: DS &nbs [#permalink] 11 Aug 2008, 07:25
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