A marketing manager at Apsitle, a premium chocolate manufacturer

Question

A marketing manager at Apsitle, a premium chocolate manufacturer, is evaluating six proposed product concepts submitted by the Product Development team. Each row in the table below presents financial projections for one of the proposed products. These projections will help determine whether the products meet the company’s launch criteria.

Product	Revenue (Yr 1)	Operating Cost (Annual)	G&A Cost (Year 1 only)	Capital Investment (Upfront)	Shelf Life (months)
A	8.0	4.2	1.3	2.5	18
B	10.2	6.1	1.4	3.2	10
C	7.6	4.0	1.1	1.9	24
D	11.4	6.5	1.5	4.0	12
E	9.0	5.4	1.3	2.8	14
F	6.5	3.5	1.2	1.7	20

All figures are in USD millions. Unless otherwise noted, Year 1 values are expected to remain unchanged over the 5-year evaluation period.
Revenue: Forecasted Year 1 sales; assumed constant across Years 1–5
Operating Cost: Recurring annual cost for production, marketing, and logistics
G&A Cost: One-time R&D overhead applied in Year 1 only
Capital Investment: One-time upfront investment required to launch the product, applies only in year 1.

Profit over 5 years can be defined as Revenue - Operating Costs over 5 years - all one time costs and investments.

MuskaanMittal · Answer

PLEASE EXPLAIN Q2

WrickR · Answer

Q2 asks us to measure the highest capital efficiency.

Capital Efficiency = 5-year profit / Capital Invested

For C,

5 year revenue = Year 1 Revenue x 5 = 7.6 x 5 = $38 million

5 year Operating cost = Annual Operating Cost x 5 = 4 x 5 = $20 million

Other fixed costs(1 time only) = G&A Cost + Capital Investment = 1.1 + 1.9 = $3 million

Total costs = 20 + 3 = $23 million

So, Profit = Revenue - Total Costs = 38 - 23 = $15 million

Capital efficiency = 15 / 1.9 = 7.894, which is the highest value among all the given options.

gmatPreper001 · Answer

Hello  Bunuel 
Can you provide any explanation on above question its easy but too many calculations , it would be great to know another approach

Bunuel · Answer

Solution:

Question 1: Does each product meet all CEO launch criteria? 
Products evaluated:  B, C, E 
 Product B 
 
 Shelf life = 10 → must have revenue > $10M → revenue = 10.2 → pass 
 Market share = 22% → fails
  Answer: No   
 Product C 
 
 Market share = 26% → pass 
 Shelf life = 24 → pass 
 Capital = 1.9 → pass 
 Profit = (7.6 × 5) − (4.0 × 5) − 1.1 − 1.9
 = 38.0 − 20.0 − 1.1 − 1.9 =  15.0  → fails $20M threshold
  Answer: No   
 Product E 
 
 Market share = 27% → pass 
 Shelf life = 14 → pass 
 Capital = 2.8 → pass 
 Profit = (9.0 × 5) − (5.4 × 5) − 1.3 − 2.8
 = 45.0 − 27.0 − 1.3 − 2.8 =  13.9  → fails
  Answer: No   
 Final Answers : No / No / No

Question 2: Which product has highest capital efficiency? 
Capital efficiency =  (5-Year Profit) ÷ (Capital Investment) 
Compute for each product:
 Product A 
Profit = (8.0 × 5) − (4.2 × 5) − 1.3 − 2.5 = 40.0 − 21.0 − 1.3 − 2.5 =  15.2 
Efficiency = 15.2 ÷ 2.5 =  6.08 
 Product C 
Profit = 38.0 − 20.0 − 1.1 − 1.9 =  15.0 
Efficiency = 15.0 ÷ 1.9 =  7.89 
 Product D 
Profit = (11.4 × 5) − (6.5 × 5) − 1.5 − 4.0 = 57.0 − 32.5 − 1.5 − 4.0 =  19.0 
Efficiency = 19.0 ÷ 4.0 =  4.75 
 Product E 
Profit = 45.0 − 27.0 − 1.3 − 2.8 =  13.9 
Efficiency = 13.9 ÷ 2.8 =  4.96 
 Product F 
Profit = (6.5 × 5) − (3.5 × 5) − 1.2 − 1.7 = 32.5 − 17.5 − 1.2 − 1.7 =  12.1 
Efficiency = 12.1 ÷ 1.7 ≈  7.12 
 Highest: Product C 
 Answer: C

Question 3: With profit threshold lowered to $10M, which products now meet all launch criteria? 
Check: profit ≥ $10M, market share ≥ 25%, capital ≤ 4.0, shelf life ≥ 12 (or revenue > 10 if not)
 Product A 
Profit = 15.2 → pass
Market share = 28% → pass
Capital = 2.5 → pass
Shelf life = 18 → pass
 Eligible

Product C 
Profit = 15.0 → pass
Market share = 26% → pass
Capital = 1.9 → pass
Shelf life = 24 → pass
 Eligible

Product E 
Profit = 13.9 → pass
Market share = 27% → pass
Capital = 2.8 → pass
Shelf life = 14 → pass
 Eligible

Product D 
Profit = 19.0 → pass
Market share = 24% → fails
 Not eligible

Answer: A, C, and E

MANASH94 · Answer

If we calculate the profits of each product : 
A. 15.2
B. 15.9
C. 15.
D. 19.
E. 13.9
F. 12.1

Now divide each number with their respective Capital Investment (upfront Value)

You get:
A. 15.2 / 2.5 = 6.08
B. 15.9 / 3.9 = 4.9
C. 15 / 1.9 = 7.89
D. 19 / 4.0 = 4.75
E. 13.9 / 2.8 = 4.9
F. 12.1 / 1.7 = 7.1

C is the greatest hence this is the answer.

hanbyeoli · Answer

Hey, what is the ideal time to be spent solving this set?

MANASH94 · Answer

On an average per question should take not more than 2 mins, so if 3 questions in an MSR set then not to take more than 6 minutes.
Bunuel can give a better answer but based the online Webinars help by GMATclub experts, Reading and skimming should not take much more than 2-2.5 mins followed by solving the questions in another couple of minutes. For me it took around 12 mins when I started preparing and focused on accuracy first.

Dream009 · Answer

Q2 is taking more than 2 mins - any trick?

	A only
	C only
	A and C
	A, C, and E
	D only

A marketing manager at Apsitle, a premium chocolate manufacturer

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Yes	No
		B
		C
		E

GMAT Multi-Source Reasoning (MSR) Questions

A marketing manager at Apsitle, a premium chocolate manufacturer

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