In 2003, the Making Hits Record Company spent 40% of its

[igordudchenko]

I think below question is incorrectly stated. The OA is D presumes that both companies has identical budgets in terms of spending (marketing, production, and overhead). But it not mentioned ANYWHERE that SFR spent the rest of their budget (after marketing and production expenses) on overhead, not on overhead and LAs Vegas casinos and private jets. Therefore I think the OA shall be E or the question shall be restated.
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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.

[ChrisB]

Hi,
This is a good observation but I think you’re missing a major point here. I’ll discuss why we can infer that SFR spent the remainder of its budget on overhead, but that isn’t even needed to prove that D is correct. Let’s look at what you said:
But it not mentioned ANYWHERE that SFR spent the rest of their budget (after marketing and production expenses) on overhead, not on overhead and LAs Vegas casinos and private jets.
Let’s assume what you wrote is the case and that SFR could have had other categories of expense other than the three from the argument. If that were the case then SFR would split 20% of its budget across those expenses. At MOST, it would have 20% overhead. In your example, its overhead would be even lower because those other expenses would take away from the 20%. In the extreme, if the "private jets" and "booze" cost 20% of the budget then overhead would be ZERO. Comparatively speaking, MH’s overhead is given as 40% and SFR’s is somewhere between 0% and 20%. Thus MH’s overhead will always be higher than that of SFR.

Back to the inference about SFR’s overhead. It is true that the argument doesn’t disclose what percentage of song factory’s budget was spent on overhead. That said, the argument does break down the entirety of Making Hits’ budget into three categories: production, marketing, and overhead costs. Though Song Factory’s overhead isn’t explicitly mentioned, one can INFER from the argument that overhead makes up the remainder of Song Factory’s expenses because Song Factory’s production and marketing expenses were provided. Further, though you could imagine there might be other expenses incurred by Song Factory it would be difficult to assign them to another category other than one of the three provided.

Either way, great question. It’s helpful to dig deeper into a statement or answer choice. That said, it helps to visualize what’s going on and assign numbers to the problem to evaluate answer choices. It sounds to me like you got too carried away with the amount of information you felt you needed to answer the question. The GMAT will never give you everything you "could use" and instead will provide the bare minimum of what you need.

Thanks,
Chris

[igordudchenko]

Chris, thank you very much - you have provided the excellent answer for the excellent question :)

[jnelson0612]

Chris, indeed, very nice answer. :-)