GMAT Math : Calculating profit

Study concepts, example questions & explanations for GMAT Math

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Example Questions

Example Question #151 : Word Problems

Read the problem below:

The German Club wants to make and sell cookies in order to raise $500 for a field trip. The equipment they want to use costs $400 to rent and to operate, and the ingredients for the cookies cost 45 cents per cookie. The German Club wants to sell the cookies for $2.25 each. At this price, how many cookies will they need to sell in order to earn back the money they paid for the ingredients and the equipment rental and make a profit of $500?

If \(\displaystyle x\) is the number of cookies sold, then which of the following equations represents the revenue function?

Possible Answers:

\(\displaystyle R(x) = 0.45\left (x + 400 \right )\)

\(\displaystyle R(x) = 0.45x + 400\)

\(\displaystyle R(x)= 2.25x\)

\(\displaystyle R(x)= 2.25x + 400\)

\(\displaystyle R(x) = 0.45x\)

Correct answer:

\(\displaystyle R(x)= 2.25x\)

Explanation:

The money raised from each cookie sold will be $2.25, so this is to be multilplied by number of cookies \(\displaystyle x\) to obtain the revenue in terms of \(\displaystyle x\). Therefore, the revenue function is \(\displaystyle R(x)= 2.25x\).

Example Question #151 : Word Problems

Read the problem below:

The Russian Club wants to make and sell cookies in order to raise $800 for a field trip. The equipment they want to use costs $350 to rent and to operate, and the ingredients for the cookies cost 35 cents per cookie. The Russian Club wants to sell the cookies for $1.75 each. At this price, how many cookies will they need to sell in order to earn back the money they paid for the ingredients and the equipment rental and make a profit of $800?

If \(\displaystyle x\) is the number of cookies sold, then which of the following inequalities can be solved to obtain an answer to this question?

Possible Answers:

\(\displaystyle 1.75 x- (0.35x + 350) \ge 800\)

\(\displaystyle 1.75 x+(0.35x + 350) \ge 800\)

\(\displaystyle 1.75 x+ 0.35(x + 350) \ge 800\)

\(\displaystyle (0.35x + 350) - 1.75 x \ge 800\)

\(\displaystyle 1.75 x- 0.35(x + 350) \ge 800\)

Correct answer:

\(\displaystyle 1.75 x- (0.35x + 350) \ge 800\)

Explanation:

Let \(\displaystyle x\) be the number of cookies sold. The Russian Club will need to spend 35 cents, or $0.35, per cookie for the ingredients, plus $350 flat for the ingredients, so the cost function will be

\(\displaystyle C(x) = 0.35x + 350\)

They will sell the cookies for $1.75 each, thereby earning a revenue of

\(\displaystyle R(x) = 1.75 x\)

They want to earn at least $800, so the profit \(\displaystyle P = R-C\) must be at least this - or

\(\displaystyle P (x) = R(x) - C(x) \ge 800\)

Replacing \(\displaystyle R(x)\) and \(\displaystyle C(x)\) with their definitions, the inequality becomes

\(\displaystyle 1.75 x- (0.35x + 350) \ge 800\)

Example Question #151 : Word Problems

The Spanish Club wants to make and sell cookies in order to raise \(\displaystyle \$1,000\) for a field trip. The equipment they want to use costs \(\displaystyle \$400\) to rent and to operate, and the ingredients for the cookies cost \(\displaystyle 75\) cents per cookie. The Spanish Club wants to sell the cookies for \(\displaystyle \$2.50\) each. At this price, how many cookies will they need to sell in order to earn back the money they paid for the ingredients and the equipment rental and make a profit of \(\displaystyle \$1,000\)?

Possible Answers:

\(\displaystyle 800\)

\(\displaystyle 560\)

\(\displaystyle 572\)

\(\displaystyle 400\)

\(\displaystyle 343\)

Correct answer:

\(\displaystyle 800\)

Explanation:

Let \(\displaystyle x\) be the number of cookies sold. The Spanish Club will need to spend 75 cents, or $0.75, per cookie for the ingredients, plus $400 flat for the ingredients, so the cost function will be

\(\displaystyle C(x) = 0.75x + 400\)

They will sell the cookies for $2.50 each, thereby earning a revenue of

\(\displaystyle R(x) = 2.50 x\)

They want to earn at least $1,000, so the profit \(\displaystyle R-C\) must be at least this - or

\(\displaystyle P (x) = R(x) - C(x) \ge 1,000\)

Solve the inequality:

\(\displaystyle 2.50x - (0.75x+400)\ge 1,000\)

\(\displaystyle 1.75x - 400\ge 1,000\)

\(\displaystyle 1.75x \ge 1,400\)

\(\displaystyle 1.75x\div 1.75 \ge 1,400 \div 1.75\)

\(\displaystyle x \ge 800\)

The Spanish Club will need to sell 800 cookies.

Example Question #151 : Word Problems

Adam buys 12 broken cell phones for $50 each. If he fixes the cell phones and sells them each for $80, what is his total profit?

Possible Answers:

$800

$960

$600

$260

$360

Correct answer:

$360

Explanation:

Adam first buys 12 cell phones for $50 each, which means he spends:

12($50) = $600

He then sells the phones for $80 each, which means he earns:

12($80) = $960

The profit is the earnings minus the expenses, so Adam's profit is:

$960 - $600 = $360

Example Question #152 : Word Problems

It costs a company an average of \(\displaystyle \$1549\) to build one of their custom woodchippers. The company makes an average profit of \(\displaystyle 35\%\) of the cost of building a machine. To the nearest dollar, what is the average net profit the company makes per unit sold?

Possible Answers:

\(\displaystyle \$2091\)

\(\displaystyle \$2092\)

\(\displaystyle \$542\)

\(\displaystyle \$543\)

Correct answer:

\(\displaystyle \$542\)

Explanation:

The company makes an average net profit that is \(\displaystyle 35\%\) of the cost of building a machine. To calculate the average net profit in this case, simply do the following:

\(\displaystyle \$1549*0.35=\$542.12\)

So, to the nearest dollar, the company's net profit is \(\displaystyle \$$542\).

Note: avoid the trap answer \(\displaystyle \$543\). Our unrounded answer is \(\displaystyle \$542.12\), so we need to round down to \(\displaystyle \$$542\) instead of rounding up to \(\displaystyle \$543\).

Example Question #12 : Calculating Profit

The stock we just bought soared \(\displaystyle 55\) percent, in other words our position increased by \(\displaystyle \$110,000\). How much did we initially invest?

Possible Answers:

\(\displaystyle \$250,000\)

\(\displaystyle \$200,000\)

\(\displaystyle \$256,000\)

\(\displaystyle \$310,000\)

\(\displaystyle \$125,000\)

Correct answer:

\(\displaystyle \$200,000\)

Explanation:

A 55% increased of the unkown value \(\displaystyle X\) resulting as a \(\displaystyle +110,000\) increase can be written as follow \(\displaystyle X0.55= 110,000\).

So

\(\displaystyle X=\frac{110,000}{0.55}=\frac{110,000 \cdot 100}{55}\)

\(\displaystyle X=200,000\), which is the initial value.

Example Question #161 : Word Problems

Mary, a very respected day trader, has the following postions: She invested \(\displaystyle \$150,000\) in stock A, \(\displaystyle \$120,000\) in stock B and \(\displaystyle \$45,000\) in stock C. What is her total return, in dollars on this portfolio considering the fact that since she invested in these stocks, A went up \(\displaystyle 4\%\), B went down \(\displaystyle 5\%\) and C increased \(\displaystyle 1\%\).

Possible Answers:

\(\displaystyle \$4,500\)

\(\displaystyle \$6,000\)

\(\displaystyle \$450\)

\(\displaystyle \$5,850\)

\(\displaystyle \$3,600\)

Correct answer:

\(\displaystyle \$450\)

Explanation:

To solve this problem, we simply have to multiply each position by their respective rate.

Note that we use a negative rate if the value decreased.

The final answer is then given by following equation 

\(\displaystyle 150,000\cdot0.04+120,000\cdot (-0.05)+45,000(0.01)\) and we end up with \(\displaystyle 450\).

Example Question #161 : Word Problems

We have just lost \(\displaystyle 60\) percent, or \(\displaystyle \$6,000\), of our investment, what was the amount invested before the loss?

Possible Answers:

\(\displaystyle \$12,500\)

\(\displaystyle \$10,000\)

\(\displaystyle \$25,000\)

\(\displaystyle \$15,000\)

\(\displaystyle \$30,000\)

Correct answer:

\(\displaystyle \$10,000\)

Explanation:

To find the amount invested prior to the loss set up a proportion that represents what is given mathematically.

To write 60 percent of something is the same as,

\(\displaystyle 60\%\rightarrow \frac{60}{100}\)

If this is equivalent to $6,000 then the statement to solve would read,

\(\displaystyle \frac{60}{100}=\frac{\$6000}{Total\ Invested}\).

From here cross multiply and divide to solve for the amount invested prior to the loss.

\(\displaystyle \\ \$6000\times 100=60\times T \\ \$600000=60\times T \\ \\ \frac{\$600000}{60}=T \\ \\ \$10000=T\)

 

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