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18 Jul 2010, 20:54
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C
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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.
(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.
My question is, why isn't the answer B? The prompt didn't say fixed cost MUST change...
18 Jul 2010, 21:44
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knabi
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.
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My question is, why isn't the answer B? The prompt didn't say fixed cost MUST change...
(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.
-----------
My question is, why isn't the answer B? The prompt didn't say fixed cost MUST change...
(2) is not sufficient as we don't know what happened with fixed cost in January. Didi it increase? Decrease? Remained the same? As we have no information about it we can not assume anything. So it's clear C. Below is calculations for C:
Let the total cost in January be \(C_2\) and the total cost before be \(C_1\).
Given: \(C_2=F_2+V_2\) and \(C_1=F_1+V_1\), also \(V_2=0.95V_1\).
Question: \(\frac{C_2}{C_1}=\frac{F_2+V_2}{F_1+V_1}=\frac{F_2+0.95V_1}{F_1+V_1}=?\)
(1) The fixed cost of producing item X increased by 13% in January --> \(F_2=1.13F_1\) --> \(\frac{1.13F_1+0.95V_1}{F_1+V_1}=?\). Not sufficient to get the exact fraction.
(2) Before the changes in January, the fixed cost of producing item X was 5 times the variable cost of producing item X --> \(F_1=5V_1\) --> \(\frac{F_2+0.95V_1}{5V_1+V_1}=?\). Not sufficient.
(1)+(2) \(F_2=1.13F_1\) and \(F_1=5V_1\) --> \(F_2=1.13F_1=5.65V_1\) --> from (2) \(\frac{F_2+0.95V_1}{F_1+V_1}=?\) --> substituting \(F_2\) and \(F_1\)--> \(\frac{5.65V_1+0.95V_1}{5V_1+V_1}=\frac{6.6}{6}=1.1\) --> in January total cost increased by 10%. Sufficient. (Actually no calculations are needed: stem and statement provide us with such relationships of 4 unknowns that 3 of them can be written with help of the 4th one and when we put them in fraction, which we want to calculate, then this last unknown is reduced, leaving us with numerical value).
Answer: C.
Hope it's clear.
05 Oct 2011, 03:15
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GMATD11
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.
Guys i marked B but its wrong.
Pls discuss
(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.
Guys i marked B but its wrong.
Pls discuss
The reason 'B' is not the answer is that you are not allowed to 'assume' anything in DS questions.
You know that production cost increased by 5%. Using statement 2, you also see that production cost is a sixth of the total cost. So you assume that you know the change in the total cost. But remember, you are assuming here that overhead cost hasn't changed. Since you do not know whether overhead cost is the same or has changed, you cannot say anything about the decrease/increase in the overall cost. Even if you overlooked this, statement 1 should have reminded you that overhead cost could have changed too. Hence the answer has to be (c).
