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Company X receives most of its revenues from the sale of

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Company X receives most of its revenues from the sale of [#permalink] New post 12 Sep 2007, 20:37
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Company X receives most of its revenues from the sale of gasoline through a network of gas stations that it owns across the country. The company purchases ready-for-sale gasoline from several oil refineries at wholesale prices and sells it to the final consumer at its gas stations. Over the next quarter, the management of Company X expects that the market price of gasoline will rise by approximately 10 percent. Therefore, the management projects that the next quarter’s revenues from the sale of gasoline will also increase by approximately 10 percent.

The management's projection is based on which of the following assumptions?

A. Consumption of gasoline at the company’s gas stations will not drop in response to higher prices.

B. Company profits will not decline below their current level.

C. Higher gasoline prices will not reduce the company’s revenues from other business lines.

D. The costs of gasoline purchased by the company for subsequent sale at its gas stations will remain relatively constant.

E. The supply of gasoline is likely to decline over the next quarter.
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Re: MGMAT CR [#permalink] New post 12 Sep 2007, 20:47
GMATBLACKBELT wrote:
Company X receives most of its revenues from the sale of gasoline through a network of gas stations that it owns across the country. The company purchases ready-for-sale gasoline from several oil refineries at wholesale prices and sells it to the final consumer at its gas stations. Over the next quarter, the management of Company X expects that the market price of gasoline will rise by approximately 10 percent. Therefore, the management projects that the next quarter’s revenues from the sale of gasoline will also increase by approximately 10 percent.

The management's projection is based on which of the following assumptions?

A. Consumption of gasoline at the company’s gas stations will not drop in response to higher prices.

B. Company profits will not decline below their current level.

C. Higher gasoline prices will not reduce the company’s revenues from other business lines.

D. The costs of gasoline purchased by the company for subsequent sale at its gas stations will remain relatively constant.

E. The supply of gasoline is likely to decline over the next quarter.


It should be A. While D looks close, it does not qualify because though the profits may not rise (due to increase in costs) the revenue would rise, as revenues are only linked with sales.
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 [#permalink] New post 12 Sep 2007, 22:05
Nice. I said D cause I thought the passage said profits. Owell
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Re: MGMAT CR [#permalink] New post 12 Sep 2007, 23:21
GMATBLACKBELT wrote:
Company X receives most of its revenues from the sale of gasoline through a network of gas stations that it owns across the country. The company purchases ready-for-sale gasoline from several oil refineries at wholesale prices and sells it to the final consumer at its gas stations. Over the next quarter, the management of Company X expects that the market price of gasoline will rise by approximately 10 percent. Therefore, the management projects that the next quarter’s revenues from the sale of gasoline will also increase by approximately 10 percent.

The management's projection is based on which of the following assumptions?

A. Consumption of gasoline at the company’s gas stations will not drop in response to higher prices.

B. Company profits will not decline below their current level.

C. Higher gasoline prices will not reduce the company’s revenues from other business lines.

D. The costs of gasoline purchased by the company for subsequent sale at its gas stations will remain relatively constant.

E. The supply of gasoline is likely to decline over the next quarter.


A is the defender assumption
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 [#permalink] New post 12 Sep 2007, 23:46
i'll for D..confused between A and D..i guess D wins. cuz if the costs increases then no matter by how much % the price increases the profit will decline..but if the cost is constant then only there will b increase in profitss
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 [#permalink] New post 13 Sep 2007, 01:05
"A" for me. The company assumes that consumers will buy the same amount of gas and therefore increase their revenues. If the consumption declines then the profits will decline.
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 [#permalink] New post 13 Sep 2007, 08:02
I say it is D.

Both A and D are avery close.

Difference:
1)A is defender assumption so it is tempting.
2)A talks about consumtion of gas, which is little out of main point.
main point is increased revenue, which can be addressed by increased constant cost, mentioned in D.

Not sure if marking boundry for main point in this way is right or wrong.
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 [#permalink] New post 13 Sep 2007, 09:49
Here the confusion is between the word revenue and profits. Profits are effected by other costs, while revenue is total sales. Here revenue will increase 10 percent only if consumers continue to consume at a steady pace.
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 [#permalink] New post 13 Sep 2007, 10:35
What is OA???
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 [#permalink] New post 13 Sep 2007, 13:39
A wins by a narrow margin.
if the issue were profits, then D would qualify.

For total revenues to increase proportionally, consumers need to buy the same amount.
Hence A.
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 [#permalink] New post 13 Sep 2007, 13:46
A it is...i see no mention of profit etc..so no point in bringing it up
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 [#permalink] New post 13 Sep 2007, 14:44
Cause and relationship:

IMO A.

i) Sale constant -> Price - Buying cost = profit
ii) Sale constant - Price increased- Buying cost constant = profit increased

So, Drop in sale or increase in buying cost can harm the conclusion. In A assumption talks about "Drop in Sale". So, That's the choice.
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 [#permalink] New post 13 Sep 2007, 14:59
A because if the consumption goes down than it would make the conclusion false.
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 [#permalink] New post 13 Sep 2007, 16:56
sry late to repost. OA is A.
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 [#permalink] New post 14 Sep 2007, 04:13
Clear winner is 'A'.
As the passage talks about the revenue not the profit, the author assumes that the sale of the gasoline will remain unaffected to get the 10% increase in the revenue.
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Re: MGMAT CR [#permalink] New post 20 Sep 2007, 20:21
GMATBLACKBELT wrote:
Company X receives most of its revenues from the sale of gasoline through a network of gas stations that it owns across the country. The company purchases ready-for-sale gasoline from several oil refineries at wholesale prices and sells it to the final consumer at its gas stations. Over the next quarter, the management of Company X expects that the market price of gasoline will rise by approximately 10 percent. Therefore, the management projects that the next quarter’s revenues from the sale of gasoline will also increase by approximately 10 percent.

The management's projection is based on which of the following assumptions?

A. Consumption of gasoline at the company’s gas stations will not drop in response to higher prices.

B. Company profits will not decline below their current level.

C. Higher gasoline prices will not reduce the company’s revenues from other business lines.

D. The costs of gasoline purchased by the company for subsequent sale at its gas stations will remain relatively constant.

E. The supply of gasoline is likely to decline over the next quarter.


I take A. My reasoning is that when the stem mentions the market price then the effect should also be related to market price .i.e the sales at gas station which if decreased will impact the the revenues..
Re: MGMAT CR   [#permalink] 20 Sep 2007, 20:21
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