Cool Games Corporation derives all of its revenues through the sales

Dear ChrisLele

I was stuck between A and E . E is tempting because it says sales are more profitable to adults. And I have thought that if the sales are more profitable the decrease in sales to adults must be a reason for analyst conclusion. Can you please explain in more detail that why E is wrong ? Thanks.

If the analysts assumes that adult sales are more profitable, he is mistaken. From the text, it is clear that adult sales weren't more profitable. Nonetheless, if he assumes that sales to adults were more profitable than to children, the latter which accounted for 120 million in sales, then he more likely to conclude the opposite of what he does, i.e. Cool Games Corp. made a profit this year.

Hope that helps .

I dunno but if I should mention this but I have noticed that the right answers on a lot of the questions sound more complicated than the incorrect ones. Again. its just an observation.

Mohnish, I would just add the caveat that this may depend on the source. I am not sure that it always holds true on the OG.

Cool Games Corporation derives all of its revenues through the sales of video games. Last year, it fell just short of making a profit although it had strong revenues of $200 million worldwide, half from children and half from adults. This year, the company’s sales to children rose 20% to $120 million, but its sales to adults dropped 40% to a disappointing $60 million. One of the most renowned Wall Street analysts had forecasted that Cool Games Corporation would need to at least match its revenues of last year in order to have a chance to make a profit on video games this year. Upon hearing the news of the Cool Games Corporation’s revenue, the analyst concluded that it was not possible for the company to have made a profit this year.

Type- assumption
Boil it down - Upon hearing the news of the Cool Games Corporation’s revenue, the analyst concluded that it was not possible for the company to have made a profit this year.

A) The total cost and expenses of Cool Games Corporation did not decrease by more than the decrease in revenue for the corporation. - Correct - negate it and the argument falls apart

B) Adults usually purchased the more complex and expensive games - Irrelevant - but we do not what kind of margins these games have

C) Cool Game Corporation increased its marketing efforts to children this year. - Irrelevant

D) The average sales of all video game companies decreased significantly this year. - Irrelevant

E) Sales to adults are more profitable than sales to children. - Incorrect - If the sale to adult is more profitable, then since the proportion of total revenue from adult sales has decreased, the overall profitability will decrease even if the current year's revenue matches last years'

Answer A

Hello from the GMAT Club VerbalBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

Want to see all other topics I dig out? Follow me (click follow button on profile). You will receive a summary of all topics I bump in your profile area as well as via email.