In 2003, the Making Hits Record Company spent 40% of its total budget on the production of ten albums, 30% of its budget on the marketing of these albums, and the remainder of its budget on overhead costs. In the same year, the Song Factory Record Company spent 20% of its total budget on the production of 10 albums and 60% of its budget on the marketing of these albums. Making Hits sold a total of 800,000 copies of the ten records it produced in 2003, while the Song Factory sold a total of 1,600,000 copies of the ten records it produced in 2003.

Assuming each company met its budget, which of the following conclusions is best supported by the information given above?
The amount of money spent on marketing is directly related to the number of copies sold.
Making Hits spent more money on the production of its albums in 2003 than did the Song Factory.
Song Factory’s total revenue from the sale of albums produced in 2003 was higher than that of Making Hits.
In 2003, Making Hits spent a larger percentage of its budget on overhead costs than did the Song Factory.
The Song Factory sold more copies of its 2003 albums than Making Hits did because the Song Factory spent a higher percentage of its budget on the marketing of its albums.

Correct answer is D.

I can understand why D is the closest answer to being correct. But aren't we assuming here is that Song factory spent the rest 20% in overheads only and not any other stuff.

Please explain..

Let us look at each of the answer choices...

1)The amount of money spent on marketing is directly related to the number of copies sold.
We do not know the actual amount of the money spent. It depends on the initial budget allocated by each company. Therefore, this statement is not correct.

2)Making Hits spent more money on the production of its albums in 2003 than did the Song Factory.
Without knowing the actual budget, we cannot infer this.

3)Song Factory’s total revenue from the sale of albums produced in 2003 was higher than that of Making Hits.
Again, we are not sure. We don't know at what price the record companies sold their copies.

4)In 2003, Making Hits spent a larger percentage of its budget on overhead costs than did the Song Factory.
This is correct. It is given that Making Hits spent "the remainder of its budget on overhead costs". That means, Making Hits spent 30% of its budget on overhead costs.

It is also given that Song Factory spent 80%(60 + 20) of its budget on production and marketing. Therefore, the maximum Song Factory could spend on overhead cost is 20%, which is less than what Making Hits spent (30%). This is what the statement says. So, this is correct.

5)The Song Factory sold more copies of its 2003 albums than Making Hits did because the Song Factory spent a higher percentage of its budget on the marketing of its albums.
This is not supported by the paragraph.

mithunsam, you always do excellent work. Thank you!

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Jamie Nelson
ManhattanGMAT Instructor

Hi,

I think that (A) is always correct. We know that the revenue is price X number of albums sold. We also know that the marketing budget was 30% for the first company and 60% for the second one. So, no matter what the prices of the albums were, the marketing budgets of both companies will be proportional to their respective number of albums sold.

Any thoughts?

Thanks.

You can definitely not say that A is "always" correct. Not only do we not have any information on the absolute amount of money either company sold, we also cannot generalize that a direct relationship exists on the basis of only two data points..

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Tim Sanders
Manhattan GMAT Instructor