GMAT 2007 is calculating the number of combinations possible given a certain starting point of # of colors.
I'll start with the 4 color option, since we wouldn't want to try 3 - that's not in the answer choices.
Now pick four colors
Total possible combinations = 4+ 4!/2!2! = 4+6 = 10
So we have two overall options: we can use each color individually or we can use them in combinations of two. We have four colors, so there are four ways to use them individually. That's where the first "4+" comes from.
The second option is to use them in combos of two. If I have 4 colors, how many different ways can I combine two of them? That's n! / [r!(n-r)!]. In this case, n=4 and r=2, so we have 4!/(2!2!). That's the second half of the above.
If I simplify down, they add to 10. That means that if I start with 4 colors, I have 10 possible ways to use either one color or two colors. I need to give 12 factories unique color schemes, though, so I don't have enough ways to do that.
I suspect at this point that, if 4 colors aren't quite enough, 5 will probably be enough. 10 is pretty close to 12. But I check anyway:
5 colors alone = 5 ways
5 colors in pairs of 2 = use the same formula above to get 5!/(3!2!) = 10.
Add them up to get 15 ways to use five colors either individually or in pairs. I only need to have 12 color schemes for my 12 factories, so that's enough.