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Hotco oil burners, designed to be used in asphalt plants,

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Re: Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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Ivan91 wrote:
How the hell to answer this when I have no idea what oil burner is and what the whole passage talks about...


Hotco oil burners, designed to be used inasphalt plants, are so efficient that Hotco will sell one to the Clifton Asphalt plant for no payment other than the cost savings between the total amount the asphalt plant actuallypaid for oil using its former burner during the last two years and the total amount it will pay for oil using the Hotco burner during the next two years. On installation, the plant will make an estimated payment, which will be adjusted after two years to equal the actual cost savings.

Hotco oil burners--the product being sold
Asphalt Plants--The industry the product being sold is aimed at. Asphalt being the product this industry produces.
Cost savings of price paid for oil, used by the oil burner, will be the cost of the Hotco oil burner. Range is the two years prior to installation of the Hotco Oil Burner and the two years following the installation of the Hotco Oil Burner.

Thus the price of oil is critical to the cost savings and the price paid for the Hotco Oil Burner.
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Re: Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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New post 06 May 2013, 21:56
Thanks, the question is not difficult but if you cannot get the passage you stand no chance ;) Sometimes non native speakers have this problem ;))
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Re: Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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New post 24 May 2013, 19:33
Ivan91 wrote:
How the hell to answer this when I have no idea what oil burner is and what the whole passage talks about...


Hi Ivan,

I know that it's difficult to understand some of the passages - I find that the best way is to not get caught up in the details.

For example in this case just switch it to something else instead of oil burner:

Hyundai will give you a new car - they will not charge you for the car, but instead, they will ask for the price difference between what you spent on gas using your hummer, say 10,000$ (yes those things drink gas) and what you will spend on gas using your hyundai, say 50$. So, if gas prices stay the same, Hyundai will collect about 10k$-5$ from you. However, if gas prices hit the roof... assume a drastic 1000$/L... then your nice cost efficient Hyundai will end up spending a LOT of $$$. In the end it will come out to 5000$ for example. Obviously in this case, Hyundai is collecting less money from you.

I know this is an exaggerated example, but I find it helps to put things in more familiar situations.

Hope that helps.

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Re: Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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New post 13 Aug 2013, 00:17
Hi,

How will the difference in the prices reduce?
If Clifton spend more on oil in the next two years, then the difference in the amount expended on oil purchases will increase.
I read the stimulus many times and I clearly see that the amount Hotco Oil burners will earn as a payment is the differences in the purchase prices between the two years.

Increase in the price differences = Gain for Hotco...

How can it constitute to be a disadvantage to Hotco? I see the increasing gap to be advantageous to Hotco.

Regards,
Chechaxo






myselfhari wrote:
mun23 wrote:
run4run wrote:
Hotco oil burners, designed to be used in asphalt plants, are so efficient that Hotco will sell one to the Clifton Asphalt plant for no payment other than the cost savings between the total amount the asphalt plant actually paid for oil using its former burner during the last two years and the total amount it will pay for oil using the Hotco burner during the next two years. On installation, the plant will make an estimated payment, which will be adjusted after two years to equal the actual cost savings.

Which of the following, if it occurred, would constitute a disadvantage for Hotco of the plan described above?

A) Another manufacturer’s introduction to the market of a similarly efficient burner
B) The Clifton Asphalt plant’s need for more than one new burner
C) Very poor efficiency in the Clifton Asphalt plant’s old burner
D) A decrease in the demand for asphalt
E) A steady increase in the price of oil beginning soon after the new burner is installed

I am not understanding the content of the argument.Need every answer choice`s explanation


I am giving it a try here to explain this:

Hotco will run into losses if the diference in the amount paid by Clifton asphalt manufacturing company in the last 2 yrs is close enuf to the cost that the compnay will pay in the nex t2 yrs. ok !!
Now lets analyse the answers.

A) Another manufacturer’s introduction to the market of a similarly efficient burner - there is no comparision with other manufacturers. irrelevant. INCORRECT

B) The Clifton Asphalt plant’s need for more than one new burner. - out of scope. INCORRECT

C) Very poor efficiency in the Clifton Asphalt plant’s old burner. - might sound true. but this is a catch. we cannot compare efficiencies of old and new burner.INCORRECT

D) A decrease in the demand for asphalt. - we have no clue what demand of asphalt has to do with oil burners. this is verbal section in gmat not a physics exam in a college. INCORRECT.

E) A steady increase in the price of oil beginning soon after the new burner is installed- If the price of oil increases, the company will have to pay more for its oil in the coming 2 yrs. so the difference in price will reduce and HETCO will receive less in return. - CORRECT.
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Re: Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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New post 04 Nov 2013, 23:42
Ivan91 wrote:
How the hell to answer this when I have no idea what oil burner is and what the whole passage talks about...


you do not really need to know every single term that appear in the argument. All you need to correctly solve 90 percent of CR question is the conclusion.

in this question, the whole argument talks about cost saving, so in order to weaken the argument, the answer choice must attack the argument in that area. and answer choice E is the only one that does that.
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Re: Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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New post 02 Jun 2014, 15:39
Which of the following, if it occurred, would constitute a disadvantage for Hotco of the plan described above?
Summary: Hotco pricing plan is Price of oil * oil used (In older plants) - Price of oil * oil used (in Hotco's plants)


A) Another manufacturer’s introduction to the market of a similarly efficient burner
Effect on Hotco business = yes
Effect on Hotco plans to profit from its efficient plants = No


B) The Clifton Asphalt plant’s need for more than one new burner
If the extra burner replaces another old plant = more money for Hotco
If the extra burner replaces no another plant = more money for Hotco


C) Very poor efficiency in the Clifton Asphalt plant’s old burner
As per summary equation above, this makes more money for Hotco (Greater previous cost)

D) A decrease in the demand for asphalt
As per summary equation above, this makes more money for Hotco (Lower current cost)

E) A steady increase in the price of oil beginning soon after the new burner is installed
As per summary equation above, this could make the equation become negative, i.e. Hotco lose money in this pricing plan. This is the only answer that shows disadvantage of the plan. Answer is therefore (E)
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Re: Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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New post 24 Sep 2014, 09:12
E is clear winner indeed. It weakens the argument
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Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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New post 20 Feb 2015, 06:56
Got traped by D, as I've only 40 sec... One should not rush such questions. It's actually not a very difficult one.
So, Hotco are more efficient than standard Burners. But the clue is here that Hotco and Standard Burner BOTH use Oil.
I've rushed this one and thought that Hotco uses alternative fuel....

A) Another manufacturer’s introduction to the market of a similarly efficient burner - irrelevant
B) The Clifton Asphalt plant’s need for more than one new burner - strengthens...
C) Very poor efficiency in the Clifton Asphalt plant’s old burner - strengthens....

So, the last two are interesting:

D) A decrease in the demand for asphalt - [I've found a very good explanation wha not (D) from EGMAT] So, if the demand for asphalt decreases, the amount of oil used by Clifton to manufacture asphalt would likely decrease. If the amount of oil decreases, Clifton’s cost savings on oil would be more than they had been for the previous two years. In this case, it would be an advantage for Hotco, not a disadvantage.
E) A steady increase in the price of oil beginning soon after the new burner is installed -> CORRECT. this one has been explained by others, so I would not restate them
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Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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New post 19 Nov 2015, 21:58
Maybe I'm reading into this too much, but the question states that there "will be [an adjustment] after two years to equal the actual cost savings." The only thing that will fluctuate is the price of oil.

Now if oil increases, that's to Hotco's advantage -- given that they retain savings (a proportion), they're payment should increase because the cost of the input increases.

E would be the obvious answer without the adjusted payment bit added in so I'm a bit confused.
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Re: Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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New post 06 Jan 2016, 12:31
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Wanted to explain choice D for those not familiar. General business equation = Revenue - Costs = Profits.

The premise states that the overall amount to be paid is the difference in costs, that is, difference between costs prior to the installation and costs after the installation.

An increase in demand for asphalt will increase revenue and has nothing to do with costs.
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Re: Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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run4run wrote:
Hotco oil burners, designed to be used in asphalt plants, are so efficient that Hotco will sell one to the Clifton Asphalt plant for no payment other than the cost savings between the total amount the asphalt plant actually paid for oil using its former burner during the last two years and the total amount it will pay for oil using the Hotco burner during the next two years. On installation, the plant will make an estimated payment, which will be adjusted after two years to equal the actual cost savings.

Which of the following, if it occurred, would constitute a disadvantage for Hotco of the plan described above?

A) Another manufacturer’s introduction to the market of a similarly efficient burner
B) The Clifton Asphalt plant’s need for more than one new burner
C) Very poor efficiency in the Clifton Asphalt plant’s old burner
D) A decrease in the demand for asphalt
E) A steady increase in the price of oil beginning soon after the new burner is installed


For some reason I can't understand this. Any help will be most appreciated.


The gap of saving will decrease if the price of oil increases. For example, let suppose the initial cost of oil expenditure was $100 and because of great efficiency of the new burner the cost has reduced to $70, so the saving would be $30. But what if the crude oil price rises to twice? then there will be no saving.

hope you liked the clarification. #Kudos
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Hotco oil burners, designed to be used in asphalt plants, [#permalink]

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New post 15 Jul 2016, 05:15
A clear winner by miles is Option E

Argument say
Clifton Ashphalt currently uses old burner; Old burner uses 100 gallons of oil. One gallon of oil is 1$ . So Clifton Asphalt currently spends 100$ for oil.
Hotco will install its Burner:- Hotco burner uses only 20 gallons of oil. If the price of oil stays same 1$ per gallon, then IDEALLY Clifton Asphalt will spend only 20$ on oil and the difference of 100$-20$ =80$ will come to Hotco Burner as per the contract.

But IF after installing HOTCO Burner, the price of oil increases to 6$ a gallon then Clifton Asphalt will spend 6$*20 (Hotco burner oil consumption)=120$
Now the difference is old -new = 100-120 =-20

SO now rather then getting money from Clifton Asphalt , Hotco Burners will have to pay money to Clifton Asphalt.. Because the contract says so.
THEREFORE RISING OIL PRICES ARE DANGEROUS & VERY DISADVANTAGEOUS FOR HOTCO BURNERS.

And what option tells us that :-

OPTION E) A steady increase in the price of oil beginning soon after the new burner is installed


run4run wrote:
Hotco oil burners, designed to be used in asphalt plants, are so efficient that Hotco will sell one to the Clifton Asphalt plant for no payment other than the cost savings between the total amount the asphalt plant actually paid for oil using its former burner during the last two years and the total amount it will pay for oil using the Hotco burner during the next two years. On installation, the plant will make an estimated payment, which will be adjusted after two years to equal the actual cost savings.

Which of the following, if it occurred, would constitute a disadvantage for Hotco of the plan described above?

A) Another manufacturer’s introduction to the market of a similarly efficient burner
B) The Clifton Asphalt plant’s need for more than one new burner
C) Very poor efficiency in the Clifton Asphalt plant’s old burner
D) A decrease in the demand for asphalt
E) A steady increase in the price of oil beginning soon after the new burner is installed


For some reason I can't understand this. Any help will be most appreciated.

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Hotco oil burners, designed to be used in asphalt plants,   [#permalink] 15 Jul 2016, 05:15

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