GMAT®

Free Version

Upgrade subject to access all content

Moderate

Donut Franchise

GMAT-LWXQZE

Sally invests \$20,000 in a donut franchise that she plans to operate from a small storefront. She estimates the cost of operation (ingredients plus overhead) to be \$250 for every thousand donuts sold. She plans to keep costs within this budget by making adjustments as needed along the way. Her total investment for the first year includes the initial \$20,000 plus the cumulative cost of operation for the year.

Sally plans to sell donuts at various prices, but expects, on average, to receive 75 cents per donut (or \$750 per thousand donuts sold) in revenue. She has no other sources of revenue.

She will “break even” when her total revenue is equal to the total amount invested.“Profit” is defined as total revenue minus total investment. She will “double her investment” when her profit is equal to the initial investment – in Sally’s case, \$20,000 in profit.

This graph shows Sally's revenue, total investment and profit (labels missing intentionally).

In the column on the right, $( x , y )$ is an ordered pair corresponding to the graph above. Make only two selections, one in each column.

Sally breaks even

Sally doubles her investment

Sally breaks even

Sally doubles her investment

( 20 , 20,000)

Sally breaks even

Sally doubles her investment

( 40 , 20,000)

Sally breaks even

Sally doubles her investment

( 40, 30,000)

Sally breaks even

Sally doubles her investment

( 60, 40,000)

Sally breaks even

Sally doubles her investment

( 80, 20,000)