Data Sufficiency - Profitability of Products

CAT 1991 Slot 1 · QA · Medium · Data Sufficiency

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Is it more profitable for Company M to produce Q?

I. Product R is sold at a price four times that of Q. II. One unit of Q requires 2 units of labour, while one unit of R requires 5 units of labour. There is no other constraint on production.

  1. A.

    If the question can be answered with the help of statement I alone

  2. B.

    If the question can be answered with the help of statement II alone

  3. C.

    If both statement I and statement II are needed to answer the question

  4. D.

    If the question cannot be answered even with the help of both statements

Answer

C

Explanation

Statement I gives the selling price ratio (PR=4PQP_R = 4 P_Q). Statement II gives the labor constraint ratio. With 10 units of labor, company M can produce 5 units of Q or 2 units of R. Revenue from Q = 5×PQ5 \times P_Q, Revenue from R = 2×4PQ=8PQ2 \times 4 P_Q = 8 P_Q. Thus, R generates more revenue per unit labor. Both statements together are required to answer.

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