?

GMAT®

Free Version

Upgrade subject to access all content

Difficult

Donut Franchise - Profit

GMAT-FVVVSQ

Sally invests \$20,000 in a donut franchise and plans to operate it herself from a small storefront for one year and then calculate her profit. Along with her \$20,000 initial investment, she's estimating the cost of operation (ingredients plus overhead) to be \$250 for every thousand donuts she sells. She plans to stick to this estimate by making adjustments as needed along the way. Her total investment for the first year includes both the \$20,000 and the cumulative cost of operation.

She's decided to sell donuts at various prices, but on average she'll ensure that she receives 75 cents per donut, or \$750 per thousand donuts sold, in revenue. She has no other sources of revenue.

Profit is defined as total accumulated revenue minus total accumulated investment. An increase of \$5000 in total profit corresponds to an increase of \$(A) in revenue and \$(B) in total investment.

Identify $A$ and $B$ in the table below. Make only two selections, one in each column.

A

B

A

B

$-2500

A

B

$0

A

B

$2500

A

B

$5000

A

B

$7500