Last year, a company recorded net income (revenue minus costs)

Question

Last year, a company recorded net income (revenue minus costs) of $ 85,000,000. According to company predictions, will the company record greater net income this year?

(1) According to company predictions, revenue will increase by 8%.

(2) According to company predictions, costs will increase by 10%.

luisdicampo · Answer

Deconstructing the Question

Net income equals revenue minus costs.

Let last year's revenue be   R   and costs be   C  .

We know

R - C = 85

We need to determine whether this year's net income is greater.

Step-by-step

Statement (1): Revenue increases by   8\%  .

New net income is

1.08R - C

Costs are unknown, so the result is not determined.

Statement (1):  Insufficient

Statement (2): Costs increase by   10\%  .

New net income is

R - 1.10C

Revenue is unknown, so the result is not determined.

Statement (2):  Insufficient

Using both statements:

New net income is

1.08R - 1.10C

Compare with

R - C = 85

Difference is

0.08R - 0.10C

Substitute   R = C + 85  :

0.08(C+85) - 0.10C = -0.02C + 6.8

This can be positive or negative depending on   C  , so the result is not determined.

Answer: E

MerryCherry · Answer

Where are the options?

Bunuel · Answer

This is a data sufficiency question. Options for DS questions are always the same and usually omitted on the site.

The data sufficiency problem consists of a question and two statements, labeled (1) and (2), in which certain data are given. You have to decide whether the data given in the statements are sufficient for answering the question. Using the data given in the statements, plus your knowledge of mathematics and everyday facts (such as the number of days in July or the meaning of the word counterclockwise), you must indicate whether—

A. Statement (1) ALONE is sufficient, but statement (2) alone is not sufficient to answer the question asked.
B. Statement (2) ALONE is sufficient, but statement (1) alone is not sufficient to answer the question asked.
C. BOTH statements (1) and (2) TOGETHER are sufficient to answer the question asked, but NEITHER statement ALONE is sufficient to answer the question asked.
D. EACH statement ALONE is sufficient to answer the question asked.
E. Statements (1) and (2) TOGETHER are NOT sufficient to answer the question asked, and additional data specific to the problem are needed.

Hope this helps.

Last year, a company recorded net income (revenue minus costs)

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GMAT Data Sufficiency (DS) Questions

Last year, a company recorded net income (revenue minus costs)

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