A manufacturer can recoup it retooling costs for redesigning : GMAT Critical Reasoning (CR)
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# A manufacturer can recoup it retooling costs for redesigning

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Senior Manager
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A manufacturer can recoup it retooling costs for redesigning [#permalink]

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12 Jun 2007, 07:36
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A manufacturer can recoup it retooling costs for redesigning a product if it sells enough of the product to its distributors to pass its break-even point. Unless retail companies believe the product will sell well, however, they will not buy enough of the product from distributors to enable the manufacturer to recoup its costs. Manufacturers are more likely to retool products if the products have scored favorably in market studies or if large advance orders for the redesigned products have come in before the retooling process is started, or both.

Of the following selections, which one can be appropriately inferred from the above passage?

A) If a manufacturer receives large advance orders for the redesigned product from its distributors, it will recoup its retooling costs
B) Retail companies that stock products based on favorable market studies will sell a lot of products
C) A manufacturer that has recouped its retooling costs has sold enough of the redesigned product to pass its break-even point.
D) A manufacturer that did not get many advance orders for a redesigned product did not make a profit.
E) A manufacturer that had enough sales of a redesigned product to pass its break-even point by a wide margin did not make a profit on its sale of a product.

Last edited by Caas on 15 Jun 2007, 00:18, edited 1 time in total.
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12 Jun 2007, 07:44
A.
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12 Jun 2007, 09:34
Facts:
- A manufacturer can recoup it retooling costs for redesigning a product if it sells enough of the product to its distributors to pass its break-even point

- Manufacturers are more likely to retool products if the products have scored favorably in market studies or if large advance orders for the redesigned products have come in before the retooling process is started, or both

Conclusion:
- Unless retail companies believe the product will sell well, however, they will not buy enough of the product from distributors to enable the manufacturer to recoup its costs

X - products have scored favorably in market studies
Y - if large advance orders for the redesigned products have come in before the retooling process is started

If X or Y is true then the conclusion is true.

B - Eliminate - The Q does not talk about the stocking.
C - Eliminate - It is also possible that there are advance orders.
D - Eliminate - Possible that the retooled product has favorable studies.
E - Eliminate - Q talks about the retooling costs and not profits.

A - Correct - If the maufactuerer gets many advance orders that means his products will sell. Which is nothing but our fact Y.
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12 Jun 2007, 09:56
i am confused between A and C

According to C ---- if the manufacturer has recouped its retooling cost then it means that it has crosses that breakeven limit

i don't find anything wrong in this statement

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12 Jun 2007, 11:30
smartmundu wrote:
i am confused between A and C

According to C ---- if the manufacturer has recouped its retooling cost then it means that it has crosses that breakeven limit

i don't find anything wrong in this statement

the statement says the manufacturer can recoup retooling costs if it sells enough to pass breakeven point, but that doesn't necessarily mean that if manufacturer has recouped its retooling costs then it has crossed breakeven point.

it's a case of if A, then B
which doesn't mean, if B, then A,
it only means, if not A, then not B

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12 Jun 2007, 21:39
Regarding choice A.
Given statements say that if the manufacturer receives large advance orders for the redesigned product from its distributors, the manufacturer is likely to start the retooling process.
This is the only affirmation given.
It is not said the the manufacturer will recoup costs no matter what
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12 Jun 2007, 22:01
Caas wrote:
Regarding choice A.
Given statements say that if the manufacturer receives large advance orders for the redesigned product from its distributors, the manufacturer is likely to start the retooling process.
This is the only affirmation given.
It is not said the the manufacturer will recoup costs no matter what

Hey Caas,

What is the OA?

VC
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13 Jun 2007, 02:48
Tough one for me.
Picking C and waiting for the OA to come out.
_________________

Trying hard to conquer Quant.

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13 Jun 2007, 03:16
Does anyone have some material on CR. I am a bit worried on it.
Plzzzzzzzz help me!!!

Thanks

VC
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15 Jun 2007, 00:04
Caas I am going with C mate.

I dont think its A, for the reasons Caas mentioned earlier.

What is the OA ?What is the source of these questions ?
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15 Jun 2007, 00:16
Thank you guys for the discussion

OA is C.
Source: Nova's Prep book
15 Jun 2007, 00:16
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