Companies considering new cost-cutting manufacturing : GMAT Critical Reasoning (CR)
Check GMAT Club App Tracker for the Latest School Decision Releases http://gmatclub.com/AppTrack

 It is currently 10 Dec 2016, 05:45

### GMAT Club Daily Prep

#### Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

# Events & Promotions

###### Events & Promotions in June
Open Detailed Calendar

# Companies considering new cost-cutting manufacturing

Author Message
TAGS:

### Hide Tags

Director
Joined: 15 Aug 2005
Posts: 798
Location: Singapore
Followers: 2

Kudos [?]: 51 [0], given: 0

Companies considering new cost-cutting manufacturing [#permalink]

### Show Tags

12 Sep 2005, 17:53
00:00

Difficulty:

(N/A)

Question Stats:

0% (00:00) correct 0% (00:00) wrong based on 6 sessions

### HideShow timer Statistics

Companies considering new cost-cutting manufacturing processes often compare the projected results of making the investment against the alternative of not making the investment with costs, selling prices, and share of market remaining constant.

Which of the following, assuming that each is a realistic possibility, constitutes the most serious disadvantage for companies of using the method above for evaluating the financial benefit of new manufacturing processes?

(A) The costs of materials required by the new process might not be known with certainty.
(B) In several years interest rates might go down, reducing the interest costs of borrowing money to pay for the investment.
(C) Some cost-cutting processes might require such expensive investments that there would be no net gain for many years, until the investment was paid for by savings in the manufacturing process.
(D) Competitors that do invest in a new process might reduce their selling prices and thus take market share away from companies that do not.
(E) The period of year chosen for averaging out the cost of the investment might be somewhat longer or shorter, thus affecting the result.
_________________

Cheers, Rahul.

If you have any questions
New!
Intern
Joined: 01 Jul 2005
Posts: 22
Followers: 1

Kudos [?]: 1 [0], given: 0

### Show Tags

12 Sep 2005, 18:46
Most serious disadvantage - Competitors taking the market share.

I'll go with D.
Director
Joined: 04 Jul 2004
Posts: 904
Followers: 4

Kudos [?]: 47 [0], given: 0

### Show Tags

12 Sep 2005, 19:10
(D) says that companies' assumption that "selling price" is constant is wrong. Thus best answer.
SVP
Joined: 28 May 2005
Posts: 1723
Location: Dhaka
Followers: 7

Kudos [?]: 320 [0], given: 0

### Show Tags

12 Sep 2005, 19:34
But D in fact strengthens the conclusion, because it is taking about new manufacturing company.

my answer choice should be A.
_________________

hey ya......

Current Student
Joined: 29 Jan 2005
Posts: 5238
Followers: 24

Kudos [?]: 365 [0], given: 0

### Show Tags

12 Sep 2005, 23:11
Good question. I'm curious as to where you sourced it Rahul? Definately not Kaplan or ETS style. Seeing how the ambiguous might is used in nearly all the answer choices, I would have to go with D. It basically forces companies to adopt the new cost cutting measures if they intend to stay competitive and maintain market share.
Senior Manager
Joined: 13 Jan 2005
Posts: 331
Followers: 1

Kudos [?]: 2 [0], given: 12

### Show Tags

16 Sep 2005, 10:16
A for me.

IMO with D - by not implementing the new mfg process they can potentially loose market share. Hence they can use this data to decide if the new mfg process is financially beneficial for them.

GA
Manager
Joined: 15 Aug 2005
Posts: 179
Followers: 1

Kudos [?]: 5 [0], given: 0

### Show Tags

16 Sep 2005, 10:34
I dont know whatz wrong with me but I feel C shud be the answer.
Can some one disprove C as a valid option???

Krishna
Manager
Joined: 26 Jun 2005
Posts: 122
Followers: 2

Kudos [?]: 1 [0], given: 0

### Show Tags

16 Sep 2005, 14:21
Head is spinning on this one...I would choose C because I think it shows that by keeping costs, etc. constant, a person may not realize what the true benefit/detriment of the new process is.
_________________

Chet

Manager
Joined: 07 Oct 2004
Posts: 99
Followers: 1

Kudos [?]: 17 [0], given: 0

### Show Tags

16 Sep 2005, 14:56
Must be D. C is not correct as you could still clearly evalute the benefit of a process even if it takes a long time to turn a profit. If I offer to sell you the Golden gate for 100 billion dollars, you could still evaluate the financial benefit even if you it would take 50 years to in toll-collecting to cover the initial investment.
Director
Joined: 15 Aug 2005
Posts: 798
Location: Singapore
Followers: 2

Kudos [?]: 51 [0], given: 0

### Show Tags

16 Sep 2005, 17:09
OA is D guys!

Im still totally lost on this one! Can someone who chose D explain the logic for selecting D and also the logic for rejecting the others? Thanks!
_________________

Cheers, Rahul.

Similar topics Replies Last post
Similar
Topics:
4 Companies considering new cost-cutting manufacturing 17 14 Dec 2010, 13:33
Companies considering new cost-cutting manufacturing 3 24 Apr 2010, 12:19
Companies considering new cost-cutting manufacturing 4 09 Apr 2008, 10:39
1) Companies considering new cost-cutting manufacturing 5 13 Jul 2007, 22:19
Companies considering new cost-cutting manufacturing 4 13 Jan 2007, 04:24
Display posts from previous: Sort by