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# In order to save money, some of Company X's manufacturing

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Re: CR - oil Vs Gas prices [#permalink]

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28 Sep 2010, 06:29
although I made a big mistake in the first attempt, I found the question lovely
I think this may appear on real test!
+1
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Re: CR - oil Vs Gas prices [#permalink]

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28 Sep 2010, 10:15
thanks!
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Re: CR - oil Vs Gas prices [#permalink]

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28 Sep 2010, 14:47
grepro wrote:
The conclusion of the argument is that the next year fuel cost will be higher than this years which can only be true if the price of Natural gas will not fall.

Hence IMO C.

The argument is about cost savings from last year to this year. C says the price of natural gas will NEVER rise which is out of scope and is talking about future prices which isn't in the argument.

I believe it is D.
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Re: CR - oil Vs Gas prices [#permalink]

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28 Sep 2010, 16:49
MamtaKrishnia wrote:
OA is D.

OE is
The conclusion of the argument is that "Company X's fuel costs this year will be significantly higher than they were last year. Why? Because some of the company's plants switched from oil to natural gas when the price of gas was lower, and now the price of gas has outstripped the price of oil. We are asked to find an assumption that is necessary for the argument to work.
(A) Whether Company X has the money to cover its costs does not affect the amount of those costs.
(B) We do not need to assume that the costs cannot be offset by reducing expenditures in other areas in order for Company X's costs to be higher.
(C) We do not need to assume that gas will never be cheaper than oil in order for Company X's costs
to be higher.
(D) CORRECT. The author does not take into account the fact that only "some" of the company's plants converted to natural gas. Some of the plants, then, still use oil, which is now cheaper. So in order to conclude that the company will have to spend more on fuel, the author must assume that the extra cost of the natural gas for the plants that converted is at least as much as the cost of the oil for the plants that did not.
(E) We do not need to assume that the price of oil will not suddenly rise in order for the argument to work.

I don't quite agree with the OA(or any other answer choices for that matter)

What if in 2009- you spent $100 on oil. Then you converted "some plants" mid laste year, and you are now spending$80 on oil and $10 on natural gas(thereby saving$10).

In 2010, say your costs for oil decreased to $60 and natural gas increased to$45, so you are spending $105 now. You are spending more than last year, and the cost of natural gas is LESSER than the cost of oil. How is the assumption D correct then? You could be spending less on natural gas and more on oil, and still increase your fuel costs this year. Is there a flaw in my reasoning? Intern Joined: 02 Apr 2010 Posts: 48 Location: Mumbai Followers: 1 Kudos [?]: 6 [0], given: 0 Re: CR - oil Vs Gas prices [#permalink] ### Show Tags 28 Sep 2010, 19:07 I agree with D _________________ Consider kudos for good explanations. Manager Status: I am Midnight's Child ! Joined: 04 Dec 2009 Posts: 147 WE 1: Software Design and Development Followers: 1 Kudos [?]: 69 [0], given: 11 Re: CR - oil Vs Gas prices [#permalink] ### Show Tags 06 Mar 2011, 11:41 In case you have struggled with this question, then rest assured that it is not entirely your mistake.. Go through this link.. http://www.manhattangmat.com/forums/cri ... t1841.html _________________ Argument : If you love long trips, you love the GMAT. Conclusion : GMAT is long journey. What does the author assume ? Assumption : A long journey is a long trip. GMAT Club Premium Membership - big benefits and savings Manager Affiliations: University of Tehran Joined: 06 Feb 2011 Posts: 203 Location: Iran (Islamic Republic of) Grad GPA: 4 Concentration: Marketing Schools: Wharton GMAT 1: 680 Q45 V38 GPA: 4 WE: Marketing (Retail) Followers: 8 Kudos [?]: 37 [0], given: 57 Re: CR - oil Vs Gas prices [#permalink] ### Show Tags 29 Sep 2011, 08:09 I'm confused. The correct answer in an assumption question must be an assumption without which going from the premise to the conclusion is IMPOSSIBLE. But we can disregard the assumption in D and still come to the same conclusion. If you negate D, it will be against the explicit premise in the stimulus that now gas price is higher than oil price. ??????!?!??!??!? _________________ Ambition, Motivation and Determination: the three "tion"s that lead to PERFECTION. World! Respect Iran and Iranians as they respect you! Leave the governments with their own. Manager Joined: 20 Nov 2010 Posts: 224 Followers: 4 Kudos [?]: 26 [0], given: 38 Re: CR - oil Vs Gas prices [#permalink] ### Show Tags 29 Sep 2011, 10:53 Agree with D. Nice question. _________________ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ MGMAT 6 650 (51,31) on 31/8/11 MGMAT 1 670 (48,33) on 04/9/11 MGMAT 2 670 (47,34) on 07/9/11 MGMAT 3 680 (47,35) on 18/9/11 GMAT Prep1 680 ( 50, 31) on 10/11/11 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ CR notes http://gmatclub.com/forum/massive-collection-of-verbal-questions-sc-rc-and-cr-106195.html#p832142 http://gmatclub.com/forum/1001-ds-questions-file-106193.html#p832133 http://gmatclub.com/forum/gmat-prep-critical-reasoning-collection-106783.html http://gmatclub.com/forum/how-to-get-6-0-awa-my-guide-64327.html http://gmatclub.com/forum/how-to-get-6-0-awa-my-guide-64327.html?hilit=chineseburned Manager Joined: 11 Feb 2011 Posts: 80 Followers: 1 Kudos [?]: 2 [0], given: 0 Re: CR - oil Vs Gas prices [#permalink] ### Show Tags 29 Sep 2011, 19:02 easy one D is the answer Manager Joined: 16 Sep 2010 Posts: 223 Location: United States Concentration: Finance, Real Estate GMAT 1: 740 Q48 V42 Followers: 9 Kudos [?]: 113 [0], given: 2 Re: In order to save money, some of Company X's manufacturing [#permalink] ### Show Tags 14 Nov 2011, 21:49 D - prompt states Company's fuel costs will be higher so in order to do so the non natural gas plants need to be equal to or higher than the prior year's costs. BSchool Forum Moderator Status: Flying over the cloud! Joined: 16 Aug 2011 Posts: 912 Location: Viet Nam Concentration: International Business, Marketing GMAT Date: 06-06-2014 GPA: 3.07 Followers: 73 Kudos [?]: 603 [1] , given: 44 Re: In order to save money, some of Company X's manufacturing [#permalink] ### Show Tags 15 Nov 2011, 02:33 1 This post received KUDOS (D) The cost of fuel needed by those of Company X's plants that converted to natural gas is less than the cost of fuel needed by those plants still using oil. Conclusion of this premise: Company X's fuel costs this year will be significantly higher than they were last year. We know that some of plants converted to use gas fuel. Plants of company X belong to those converted plants The remain plants now still use oil fuel, taking advantage of increased price of oil. As we negate, the cost of fuel for company X (use oil > gas > oil respectively) < cost of oil fuel for remain plants. Weaken the argument. So, this is the assumption _________________ Rules for posting in verbal gmat forum, read it before posting anything in verbal forum Giving me + 1 kudos if my post is valuable with you The more you like my post, the more you share to other's need CR: Focus of the Week: Must be True Question Manager Joined: 01 Jan 2011 Posts: 78 Schools: INSEAD,IIMA,IIMB Followers: 0 Kudos [?]: 0 [0], given: 2 Re: In order to save money, some of Company X's manufacturing [#permalink] ### Show Tags 21 Nov 2011, 00:28 D for me _________________ _________________________ Try and you will succeed ! Director Status: Final Countdown Joined: 17 Mar 2010 Posts: 563 Location: India GPA: 3.82 WE: Account Management (Retail Banking) Followers: 17 Kudos [?]: 279 [0], given: 75 Re: In order to save money, some of Company X's manufacturing [#permalink] ### Show Tags 01 Oct 2012, 04:18 D is the right answer i agree with tuanquang269. Such questions can be easily crossed check with POE method. _________________ " Make more efforts " Press Kudos if you liked my post Manager Joined: 18 Jan 2012 Posts: 51 Location: United States Followers: 3 Kudos [?]: 91 [1] , given: 26 Re: In order to save money, some of Company X's manufacturing [#permalink] ### Show Tags 01 Oct 2012, 08:16 1 This post received KUDOS In order to save money, some of Company X's manufacturing plants converted from oil fuel to natural gas last year, when the cost of oil was more than the cost of natural gas. Because of a sudden, unexpected shortage, however, natural gas now costs more than oil, the price of which has fallen steeply over the past year. The cost of conversion back to oil would more than negate any cost savings in fuel. So Company X's fuel costs this year will be significantly higher than they were last year. Which of the following is an assumption on which the argument above depends? (A) Company X does not have money set aside for the increased costs of fuel. It's pretty obvious that this answer choice has nothing to do with the conclusion, which states that Company X's fuel costs this year will be significantly higher than they were last year. (B) The increase in the cost of fuel cannot be offset by reductions in other operating expenses. The conclusion is very specific about rising fuel bill . This answer choice deals with "total costs". It is very possible that fuel costs are the highest ever and the total costs are the lowest ever. Unlikely,but definitely possible (C) The price of natural gas will never again fall below that of oil. This is a very tricky answer choice. The conclusion talks about [b]total fuel costs for this year. Assume that the company closes its financial books on Dec 31st. It is very possible that fuel prices crash in Dec 30 to their all time lows. Despite this possibility, the fuel costs for the company can be higher than last year [/b] (D) The cost of fuel needed by those of Company X's plants that converted to natural gas is not less than the cost of fuel needed by those plants still using oil. A-Ha. Finally, we have an answer choice that addresses the real issue of "total fuel price". Just to be sure, let's negate this answer choice The cost of fuel needed by those of Company X's plants that converted to natural gas is LESSthan the cost of fuel needed by those plants still using oil. This shatters the conclusion. An assumption is an integral part of the argument. Negate the assumption and the conclusion falls apart like Romney in the presidential debate Total fuel costs Last year = Total Natural Gas Costs last year + Total Oil Costs last year Total fuel costs this year = Total Natural Gas Costs this year + Total Oil Costs this year Price of Natural Gas has significantly increased and price of Oil has gone down significantly. If Total fuel costs this year needs to be significantly > Total fuel costs Last year, that implies Total Natural Gas Costs this year >>> Total Oil Costs this year Why ? Because Total Oil Costs this year is much lesser than total oil cost last year. (E) The price of oil will not experience a sudden and steep increase. Do we really care about price of oil. Our comparison is the price of Natural Gas fuel this year Vs the price of oil LAST YEAR. This is like my neigbour winning a lottery. No material impact on my finances _________________ ----------------------------------------------------------------------------------------------------- IT TAKES QUITE A BIT OF TIME AND TO POST DETAILED RESPONSES. YOUR KUDOS IS VERY MUCH APPRECIATED ----------------------------------------------------------------------------------------------------- Intern Joined: 17 Jun 2007 Posts: 22 Followers: 0 Kudos [?]: 2 [0], given: 4 Re: In order to save money, some of Company X's manufacturing [#permalink] ### Show Tags 22 Apr 2013, 21:49 Probably, I'm the only one who don't understand how is D wrong. But, here is my understanding. According to the question. Company X is looking to reduce its fuel cost. I failed to understand why is B wrong & D right. Please help. negating B: The increase in the cost of fuel can be offset by reductions in other operating expenses. This breaks the argument. So B should be right. As for D, how is the comparison between cost of fuel needed by oil & natural gas plants determine fuel cost higher or lower. Wouldn't it had been better if it is comparing cost of fuel needed by natural gas plants this year with cost of fuel need by oil plants last year. Verbal Forum Moderator Joined: 15 Jun 2012 Posts: 1153 Location: United States Followers: 260 Kudos [?]: 2874 [0], given: 123 Re: In order to save money, some of Company X's manufacturing [#permalink] ### Show Tags 25 Apr 2013, 22:48 Maverick_Indian wrote: Probably, I'm the only one who don't understand how is D wrong. But, here is my understanding. According to the question. Company X is looking to reduce its fuel cost. I failed to understand why is B wrong & D right. Please help. negating B: The increase in the cost of fuel can be offset by reductions in other operating expenses. This breaks the argument. So B should be right. @ Maverick B is wrong because we just compare "Company X's fuel costs", we do not compare operating expenses this year with that of last year. So the increase/decrease of Opex doesn't matter. Maverick_Indian wrote: As for D, how is the comparison between cost of fuel needed by oil & natural gas plants determine fuel cost higher or lower. Wouldn't it had been better if it is comparing cost of fuel needed by natural gas plants this year with cost of fuel need by oil plants last year. We need to compare cost of fuel needed by natural gas plants with cost of fuel need by oil plants THIS YEAR. Let analyze an example: Company X has two plants A and B. Last year: A (used natural gas) costs$5; B (used oil) costs $10 ==> Total fuel cost is$15
This year: Natural gas increases to $X, Oil increases to$15
A will cost $X, B will cost$15 ==> Total fuel cost is (X + 15)

If you compare cost of A this year ($X) with cost B LAST year ($10), it doesn't make sense. Okay, let say X = $12 (greater than cost of fuel need by oil plants LAST year) ==> total fuel cost this year = 12 + 15 = 27. If A switches to oil ==> Total fuel cost = 15 + 15 = 30 ==> Clearly, Company still saves if A still uses natural gas ==> You cannot say that "the total fuel will increase if cost of plants using natural gas this year is no less than that of plants using oil last year" Okay, if you compare cost of A this year ($X) with cost B THIS year ($15). It makes more sense. let say X =$12 (less than cost of fuel need by oil plants this year) ==> total fuel cost this year = 12 + 15 = 27. If A switches to oil ==> Total fuel cost = 15 + 15 = 30 ==> The total fuel cost will not increase if cost of natural gas is LESS than that of oil this year. ==> The cost of fuel only increases if X > 15. This is what D says.

Hope it helps.
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Re: In order to save money, some of Company X's manufacturing [#permalink]

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26 Apr 2013, 13:52
You miss one word in these passages and your answer goes for a toss. missed reading "some" and marked E. D is straight after re-reading.
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Re: In order to save money, some of Company X's manufacturing [#permalink]

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02 May 2013, 00:45
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I find the explanation given by most people ,who agree that D is correct ,is wrong.

We need to note that "cost of Natural gas" and "cost of natural gas required for the plant" are entirely different.It may happen that even though Natural gas is costly the overall cost of running the plant with natural gas for a year may be less than the cost of running a plant with oil.

i hope i make sense

MamtaKrishnia wrote:
In order to save money, some of Company X's manufacturing plants converted from oil fuel to natural gas last year, when the cost of oil was more than the cost of natural gas. Because of a sudden, unexpected shortage, however, natural gas now costs more than oil, the price of which has fallen steeply over the past year. The cost of conversion back to oil would more than negate any cost savings in fuel. So Company X's fuel costs this year will be significantly higher than they were last year.

Which of the following is an assumption on which the argument above depends?

(A) Company X does not have money set aside for the increased costs of fuel.
(B) The increase in the cost of fuel cannot be offset by reductions in other operating expenses.
(C) The price of natural gas will never again fall below that of oil.
(D) The cost of fuel needed by those of Company X's plants that converted to natural gas is not less than the cost of fuel needed by those plants still using oil.
(E) The price of oil will not experience a sudden and steep increase.
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Re: In order to save money, some of Company X's manufacturing [#permalink]

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02 Oct 2013, 22:09
Consider all in all 10 plants.

Last year

Oil=6
Gas=4

Total Cost = 6O1 + 4G1 (Knowing O1>G1)

This year

Total cost = 6O2+ 4G2 (Knowing G2>O2)

Since price of Gas increased and that of oil decreased we can take values as below:

O1=2 , G1=1
O2=1, G2=2

Substituting

Last year TC = 16
This year TC = 14 This year < Last year

(D). 6O2 >= 4G2 => 6 > 8 but 6 < 8

So for This year > Last year

take O2=2, G2=3

6O2=12
4G2=12

Total cost This year =24
Last Year = 16

Hence (D)
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Re: In order to save money, some of Company X's manufacturing [#permalink]

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09 Oct 2014, 12:34
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Re: In order to save money, some of Company X's manufacturing   [#permalink] 09 Oct 2014, 12:34

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