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

Question

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

(A) $3.00
(B) $3.75
(C) $4.50
(D) $5.00
(E) $5.50

Bunuel · Accepted Answer

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

(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.

Answer: C.

Hope it's clear.

nishantmehra01 · Answer

TC = 10,000 + 3x

TR = 8x

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

when x = 20000, Profit = 90000

Profit per x = 90000/20000 = 4.5

ScottTargetTestPrep · Answer

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) –

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) –

P = 20,000 x 8 –

P = 160,000 –

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.

bimalr9 · Answer

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.

valepm · Answer

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

susheelh · Answer

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

Answer Choice : C

avigutman · Answer

Video solution from Quant Reasoning starts at 14:58 Subscribe for more: https://www.youtube.com/QuantReasoning? ... irmation=1 https://www.youtube.com/watch?v=f1ZUcAczAF8

GMATinsight · Answer

Answer: Option C

Video solution by  GMATinsight

https://www.youtube.com/watch?v=2ekwtmEl0ok

avigutman · Answer

Video solution from Quant Reasoning: Subscribe for more: https://www.youtube.com/QuantReasoning? ... irmation=1 https://www.youtube.com/watch?v=eEbFZWoLVrU

Underoos · Answer

Production Cost = $10,000 + $3/Tool
Selling Price = $8

Total Selling Price (SP) = 20,000 * 8 = $160,000
Total Cost = $10,000 + $60,000 (20,000 Tools * $3 Variable Cost)

Gross Profit = SP - Cost = 160,000 - 70,000 = $90,000

GP/Unit = $90,000/$20,000 = $4.5

totaltestprepNick · Answer

C https://www.youtube.com/watch?v=pIst4P17lI4 Nick Slavkovich, GMAT/GRE tutor with 20+ years of experience tutoring@totaltestprep.net

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

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