GMAT Focus EditionData InsightsMedium
A retail company is analyzing its sales data across three product categories: Electronics, Apparel, and Home Goods. The company wants to understand the average revenue generated per transaction for each category. Electronics: 1,500 transactions, total revenue $300,000 Apparel: 2,500 transactions, total revenue $450,000 Home Goods: 1,000 transactions, total revenue $220,000 Which product category has the highest average revenue per transaction?
- AHome Goods
- BApparel
- CElectronics and Home Goods have the same highest average
- DElectronics
Show answer & explanationAnswer & explanation
Correct answer: A. Home Goods
To find the average revenue per transaction, divide total revenue by the number of transactions for each category. Electronics: $300,000 / 1,500 = $200. Apparel: $450,000 / 2,500 = $180. Home Goods: $220,000 / 1,000 = $220. Home Goods has the highest average.
Why the other options are wrong
- B. Apparel has an average revenue per transaction of $180, which is the lowest.
- C. Electronics and Home Goods do not have the same highest average; Home Goods is higher.
- D. Electronics has an average revenue per transaction of $200, which is not the highest.
Average Revenue Per Transaction
Average Revenue Per Transaction (ARPT) is a metric that calculates the average amount of money a business earns from each completed sale or transaction. It indicates the value of individual customer purchases.
- Calculated as Total Revenue / Total Transactions.
- Helps understand customer spending habits.
- Useful for pricing strategies and product bundling.
Memory trick: Higher average revenue per transaction means customers are buying more each time.