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24 Jan 2017, 10:47
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iliavko
Stmnt 2 is not sufficient.
The total cost of producing item X is equal to the sum of item X's overhead cost and production cost. If the production cost of producing X decreased by 5% in January, by what percent did the total cost of producing item X change in that same month?
(1) The overhead cost of producing item X increased by 13% in January.
(2) Before the changes in January, the overhead cost of producing item X was 5 times the production cost of producing item X.
Total Cost = Overhead Cost + Production Cost
We need to find the change in total cost. The question stem gives the percent decrease in production cost. But stmnt 1 gives the percent change in overhead cost. Without knowing the change in overhead cost, you cannot calculate the change in total cost. You cannot assume that there is no change in overhead cost.
Stmnt 2 tells us that if total cost was 120, 100 was overhead cost and production cost was 20. We know how 20 changed. But we also need to know whether and how 100 changed to know how 120 changed.
Hence, both statements are needed.
Answer (C)
mbaapp1234
GMAT 2: 760 Q49 V44
Posts: 81
28 May 2017, 20:05
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GMATD11
Goal: determine the exact percent increase/decrease in the total cost of producing item X in January. In order to arrive at a specific value, we need to know the relative change for the overhead and production costs, since they sum to the total cost, as well as their relative size. We are told that production costs fell by 5%.
Statement 1) We know that the overhead cost increased by 13%, but we don't know its size or the size of the production costs. Insufficient.
Statement 2) We are told that the overhead costs are 5 times the production costs, but we don't know the size of either. Without the size, we can't do a weighted average to find the overall change. Insufficient.
Statements 1+2) We are told that the relative sizes of both as well as the change to the variable costs over the period we care about, so we can set up a weighted average formula:
1/6*(-5%) + 5/6(13%) = 10%
Sufficient.
17 Feb 2018, 06:00
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GMATD11
Hi,
I saw many replies to this and people rejected B because QUESTION DOES NOT TELL US ABOUT CHANGES IN OVERHEAD COST!
My query is WHY ON EARTH ARE WE WORRIED ABOUT Overhead cost?
We are given
C= O+P
and P in January became = 95/100 *P
Cost in January will be = O + 95/100 * P
Statement 2 ) Before changes, O = 5P
So our original eqn will be
C= 6P ...................................... eqn 1 (before change)
C = 6 * 95/100 * P....................... eqn 2 (after change)
Hence we can find out percent change! isn't it?
I need help please GMATNinja bb VeritasPrepKarishma Bunuel
