trainspotting 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?
Methodology:
A. Consumption of gasoline at the company’s gas stations will not drop in response to higher prices. A very good option. Keep on hold.
B. Company profits will not decline below their current level. Current profilts declining is not in scope.
C. Higher gasoline prices will not reduce the company’s revenues from other business lines. Other business lines are irrelevant.
D. The costs of gasoline purchased by the company for subsequent sale at its gas stations will remain relatively constant. Worth a revisit because it mentions costs.
E. The supply of gasoline is likely to decline over the next quarter. So? Does it also mean that there won't be a supply recovery in Q2? Unsaid. This is also not an assumption.
Between Options
A and
DOption
D mentions cost of purchase. The stimulus however mentions
revenues from the sale of gasoline and not company revenue (cost + profit). Thus, the revenue here specifically implies
income from sale of gasoline.
MGMAT has previously used revenue in question-specific terms too. Refer this question:
https://gmatclub.com/forum/box-office-r ... 20released.
I feel if this question were to appear in GMAT, income would be specified instead of the generalised term 'revenue'. Say income is used, for an increase of 10% in both income AND selling price, all other conditions have to be constant. One condition is the
consumption of gasoline. That's option
A.
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“There are lies, damned lies, and statistics.”
Saurav