I have a question regarding the sample question on this page http://www.800score.com/gmat-test-question.html The question asks: A trader has two kinds of wheat grains - one that he purchased for $20 per sack, and the other that he purchased for $12.5 per sack. How many sacks of the cheaper wheat should he mix in 50 sacks of the expensive wheat, so that the mixture yields a 33.33% profit when sold at $20 per sack? (a) 20 (b) 25 (c) 50 (d) 100 (e) 200
Your answer is 100. i think that the answer should be 400. Your answer suggests that the profit margin is based on the cost of the goods sold and not on the sale price. $5 correlates with a 33% profit margin only at $15, which is the total cost of the items sold. A 33% profit based on the revenue, which is the economically correct way to calculate profit margin, would be $6.60. To then arrive at the number of bags needed at $12.50 to arrive at this profit margin level would be 400. Please tell me why I am wrong. Thanks. Mike
Post subject: Re: Is one of the Sample Questions Wrong
Posted: Wed Mar 02, 2011 9:50 am
Joined: Fri Apr 09, 2010 2:11 pm Posts: 459
There is some peculiarity regarding the term "profit of __ %"
Just before recently the base for percentage was considered in only one way, "rate of profit", as in investment. rate of profit = profit/costs
In recent years the the term "profit margin", as in accounting, became also widely-spread. profit margin = profit/revenue
Math problems usually refer to the rate of profit (they look at the process as an investment).
If it is an accounting problem, then it more likely refers to profit margin (depends on the wording of the problem).
But as questions develop, we should be seeing clearer distinction between these two terms: - either the base will be indicated, e.g. "profit of __% of the revenue" - or the term will be used in full wording, e.g. "rate of profit is ___%".
Users browsing this forum: Bing [Bot] and 3 guests
You cannot post new topics in this forum You cannot reply to topics in this forum You cannot edit your posts in this forum You cannot delete your posts in this forum You cannot post attachments in this forum
GMAT(TM) and GMAT CAT (TM) are registered trademarks of the Graduate Management Admission Council(TM). The Graduate Management Admission Council(TM) does not endorse, nor is affiliated in any way with the owner or any content of this site.