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Senior Manager
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A discount retailer of basic household necessities employs [#permalink]
 12 May 2008, 03:40
Question Stats:
100% (01:59) correct
0% (00:00) wrong based on 3 sessions
A discount retailer of basic household necessities employs thousands of people and pays most of them at
the minimum wage rate. Yet following a federally mandated increase of the minimum wage rate that increased
the retailer’s operating costs considerably, the retailer’s profits increased markedly.
Which of the following, if true, most helps to resolve the apparent paradox?
(A) Over half of the retailer’s operating costs consist of payroll expenditures; yet only a small percentage of
those expenditures go to pay management salaries.
(B) The retailer’s customer base is made up primarily of people who earn, or who depend on the earnings of
others who earn, the minimum wage.
(C) The retailer’s operating costs, other than wages, increased substantially after the increase in the minimum
wage rate went into effect.
(D) When the increase in the minimum wage rate went into effect, the retailer also raised the age rate for
employees who had been earning just above minimum wage.
(E) The majority of the retailer’s employees work as cashiers, and most cashiers are paid the minimum wage.
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Re: CR: INCREASED WAGE VS. INCREASED PROFIT [#permalink]
12 May 2008, 06:43
B
Profits, operating costs or revenue must be addressed in the solution. Distribution of operating expenses is unimportant.
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Re: CR: INCREASED WAGE VS. INCREASED PROFIT [#permalink]
12 May 2008, 06:43
lexis wrote: A discount retailer of basic household necessities employs thousands of people and pays most of them at
the minimum wage rate. Yet following a federally mandated increase of the minimum wage rate that increased
the retailer’s operating costs considerably, the retailer’s profits increased markedly.
Which of the following, if true, most helps to resolve the apparent paradox?
(A) Over half of the retailer’s operating costs consist of payroll expenditures; yet only a small percentage of
those expenditures go to pay management salaries.
(B) The retailer’s customer base is made up primarily of people who earn, or who depend on the earnings of
others who earn, the minimum wage.
(C) The retailer’s operating costs, other than wages, increased substantially after the increase in the minimum
wage rate went into effect.
(D) When the increase in the minimum wage rate went into effect, the retailer also raised the age rate for
employees who had been earning just above minimum wage.
(E) The majority of the retailer’s employees work as cashiers, and most cashiers are paid the minimum wage. Is it B?
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Re: CR: INCREASED WAGE VS. INCREASED PROFIT [#permalink]
12 May 2008, 06:49
lexis wrote: A discount retailer of basic household necessities employs thousands of people and pays most of them at
the minimum wage rate. Yet following a federally mandated increase of the minimum wage rate that increased
the retailer’s operating costs considerably, the retailer’s profits increased markedly.
Which of the following, if true, most helps to resolve the apparent paradox?
(A) Over half of the retailer’s operating costs consist of payroll expenditures; yet only a small percentage of
those expenditures go to pay management salaries.
(B) The retailer’s customer base is made up primarily of people who earn, or who depend on the earnings of
others who earn, the minimum wage.
(C) The retailer’s operating costs, other than wages, increased substantially after the increase in the minimum
wage rate went into effect.
(D) When the increase in the minimum wage rate went into effect, the retailer also raised the age rate for
employees who had been earning just above minimum wage.
(E) The majority of the retailer’s employees work as cashiers, and most cashiers are paid the minimum wage. B The retailer will gain more money and offset that profit from the loss in increased minimum wage.
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Director
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Re: CR: INCREASED WAGE VS. INCREASED PROFIT [#permalink]
12 May 2008, 12:42
B A discount retailer of basic household necessities employs thousands of people and pays most of them at the minimum wage rate. Yet following a federally mandated increase of the minimum wage rate that increased the retailer’s operating costs considerably, the retailer’s profits increased markedly. -> there is some connection between the people who earn the minimum wage and the increased profits-> look for a choice that depicts the relationship between these two-> Only B Does it
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Director
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Re: CR: INCREASED WAGE VS. INCREASED PROFIT [#permalink]
12 May 2008, 12:55
B for me as well.
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Intern
Joined: 05 Mar 2013
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GMAT Date: 04-20-2013
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Re: A discount retailer of basic household necessities employs [#permalink]
14 Apr 2013, 08:56
Blue Book CR72
Strengthen
Conclusion: Retailer's profits increased considerably even though operating costs increased markedly. Why?
Premise: Federal mandated increase of min. wage rate.
Thinking: Could be the increase in op. cost < profit. But considerably and markedly suggest the increase is about the same.
It's B: If retailer's customer is primarily people w min. wage, then the increase in min. wage caused them to shop more frequently or in a larger amount, thus explains the increase in profit despite the increase in op. cost.
Not D: Increase in min. wage, retailer raised wage rate to employees earning above min. wage suggests the opposite that profits should decrease due to unnecessary increase in op. cost.
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Senior Manager
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Re: A discount retailer of basic household necessities employs [#permalink]
14 Apr 2013, 16:29
lexis wrote: A discount retailer of basic household necessities employs thousands of people and pays most of them at
the minimum wage rate. Yet following a federally mandated increase of the minimum wage rate that increased
the retailer’s operating costs considerably, the retailer’s profits increased markedly.
Which of the following, if true, most helps to resolve the apparent paradox?
(A) Over half of the retailer’s operating costs consist of payroll expenditures; yet only a small percentage of
those expenditures go to pay management salaries.
(B) The retailer’s customer base is made up primarily of people who earn, or who depend on the earnings of
others who earn, the minimum wage.
(C) The retailer’s operating costs, other than wages, increased substantially after the increase in the minimum
wage rate went into effect.
(D) When the increase in the minimum wage rate went into effect, the retailer also raised the age rate for
employees who had been earning just above minimum wage.
(E) The majority of the retailer’s employees work as cashiers, and most cashiers are paid the minimum wage. Fairly easy Resolve the Paradox. In this kind of question, we need to find "new" element which can solve both sides of the paradox, not only one side. In addition, there's no conclusion here, just facts.
Fact: A discount retailer pays most of employees at the minimum wage rate Fact: minimum wage increased. Operating expenses should increase. Profit should decrease. Fact: But retailer's profit increased markedly. Profit = Revenue - Cost.What if Revenue increases faster than does cost. >>> Profit will increase.D says: retailer's customers = people who earn minimum wages. If their income increase >>> they may purchase more >>> Retailer's profit may increase. D is correct. Hope it helps.
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Re: A discount retailer of basic household necessities employs
[#permalink]
14 Apr 2013, 16:29
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