The Revenues and Costs, in Thousands of Dollars, for a Small Company in the Year 2007 GMAT Problem Solving

Question: The following tables show the revenues and costs, in thousands of dollars, for a small company in the year 2007

Profit = Revenue – Costs. If costs remain constant from 2007 to 2008, and if revenues increase by 10% in that same period, by what percent will profits increase from 2007 to 2008?

1. 11.6%
2. 25.8%
3. 34.7%
4. 71.2%
5. 116.3%

‘The following tables show the revenues and costs, in thousands of dollars, for a small company in the year 2007’ - is a topic of the GMAT Quantitative reasoning section of GMAT. This question has been taken from the book “GMAT Official Guide 2022”. To solve GMAT Problem Solving questions a student must have knowledge about a good amount of qualitative skills. The GMAT Quant topic in the problem-solving part requires calculative mathematical problems that should be solved with proper mathematical knowledge.

Solution and Explanation:

Approach Solution 1:

For 2007, the profit is
=1052-749
=303

For 2008, the profit is
= 1.1*1052 -749
= 1157.2- 749
=408.2

Now the percentage increase in profit
= ((408.2-303)/303)*100
= (105.2/303)*100
= 34.7%

Hence, C is the correct answer.

Correct Answer: C

Approach Solution 2:

The numbers are unwieldy, and answers are far apart. Round.
Let original costs = $750
Let original revenue = $1,050

Original profit (Revenues -Costs):
$1,050 - $750 = $300

NEW revenues
Revenues increase 10 percent:
1.1 = \(1\frac{1}{10}\) = 11/10
= $1,050 * 11/10
= 11∗105
=$1,155

NEW profit:
$1,155 - $750 = $405
≈$400
≈$400

PERCENT INCREASE in profits?

Percent change:
=>\(\frac{New-Old}{Old} * 100\)
=>\(\frac{400-300}{300} * 100\)
=>\(\frac{100}{300} *100\)
=>\(\frac{1}3 *100\)
=>0.33*100
=>33%

The answer will be slightly higher than 33 percent because the new profits were rounded at the start of the equation..
Only one answer is close: 34.7% percent.
Hence, C is the correct answer.

Correct Answer: C

Approach Solution 3:

Profit = Revenue - Costs

So according to the question, the costs will remain constant from 2007 to 2008.

Revenues increased by 10% and the percent increased in profits from 2007 to 2008. 
Profit in 2007 = (Revenue in 2007) - (Costs in 2007) = 1052 - 749 = an estimate of 1050 - 750 = 300
The question mentions that in 2008, revenue will increase by 10% and costs remains same
Profit in 2008 = (Revenue in 2008) - (Costs in 2008) =(1.1)(1050) - 750

=1155 - 750 =405
Percentage Change = (New - Old)/(Old) = (Difference)/(Original) = (405 - 300)/(300) = 105/300 = a little more than 1/3 = a little more than 33%

Correct Answer: C

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