Find all School-related info fast with the new School-Specific MBA Forum

It is currently 19 Dec 2014, 13:39

Close

GMAT Club Daily Prep

Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track
Your Progress

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.

Events & Promotions

Events & Promotions in June
Open Detailed Calendar

Mechanicorp s newest product costs so little to make that it

  Question banks Downloads My Bookmarks Reviews Important topics  
Author Message
TAGS:
Manager
Manager
User avatar
Joined: 04 Jan 2008
Posts: 120
Followers: 2

Kudos [?]: 18 [0], given: 0

Mechanicorp s newest product costs so little to make that it [#permalink] New post 10 Sep 2008, 22:30
1
This post was
BOOKMARKED
00:00
A
B
C
D
E

Difficulty:

(N/A)

Question Stats:

60% (01:44) correct 40% (01:48) wrong based on 11 sessions
Mechanicorp’s newest product costs so little to make that it appears doubtful the company will be able to sell it without increasing the markup the company usually allows for profit: potential clients would simply not believe that something so inexpensive would really work. Yet Mechanicorp’s reputation is built on fair prices incorporating only modest profit margins.

The statements above, if true, most strongly support which of the following?

(A) Mechanicorp will encounter difficulties in trying to set a price for its newest product that will promote sales without threatening to compromise the company’s reputation.
(B) Mechanicorp achieves large annual profits, despite small profits per unit sold, by means of a high volume of sales.
(C) Mechanicorp made a significant computational error in calculating the production costs for its newest product.
(D) Mechanicorp’s newest product is intended to perform tasks that can be performed by other devices costing less to manufacture.
(E) Mechanicorp’s production processes are designed with the same ingenuity as are the products that the company makes.
Director
Director
avatar
Joined: 23 Sep 2007
Posts: 797
Followers: 5

Kudos [?]: 87 [0], given: 0

Re: Zumit CR 005 [#permalink] New post 10 Sep 2008, 23:05
dancinggeometry wrote:
Mechanicorp’s newest product costs so little to make that it appears doubtful the company will be able to sell it without increasing the markup the company usually allows for profit: potential clients would simply not believe that something so inexpensive would really work. Yet Mechanicorp’s reputation is built on fair prices incorporating only modest profit margins.

The statements above, if true, most strongly support which of the following?

(A) Mechanicorp will encounter difficulties in trying to set a price for its newest product that will promote sales without threatening to compromise the company’s reputation.
(B) Mechanicorp achieves large annual profits, despite small profits per unit sold, by means of a high volume of sales.
(C) Mechanicorp made a significant computational error in calculating the production costs for its newest product.
(D) Mechanicorp’s newest product is intended to perform tasks that can be performed by other devices costing less to manufacture.
(E) Mechanicorp’s production processes are designed with the same ingenuity as are the products that the company makes.


A
SVP
SVP
avatar
Joined: 21 Jul 2006
Posts: 1551
Followers: 8

Kudos [?]: 257 [0], given: 1

Re: Zumit CR 005 [#permalink] New post 11 Sep 2008, 01:43
dancinggeometry wrote:
Mechanicorp’s newest product costs so little to make that it appears doubtful the company will be able to sell it without increasing the markup the company usually allows for profit: potential clients would simply not believe that something so inexpensive would really work. Yet Mechanicorp’s reputation is built on fair prices incorporating only modest profit margins.

The statements above, if true, most strongly support which of the following?

(A) Mechanicorp will encounter difficulties in trying to set a price for its newest product that will promote sales without threatening to compromise the company’s reputation.
(B) Mechanicorp achieves large annual profits, despite small profits per unit sold, by means of a high volume of sales.
(C) Mechanicorp made a significant computational error in calculating the production costs for its newest product.
(D) Mechanicorp’s newest product is intended to perform tasks that can be performed by other devices costing less to manufacture.
(E) Mechanicorp’s production processes are designed with the same ingenuity as are the products that the company makes.


I choose B as my answer. Here is why:

(A) encounter difficulties? why? it says in the argument that the company's product is so cheap to make. also, even if the company increases its usually allowed markup for this new product, potential customers would still not believe that such an inexpensive product will work. So customers still believe that the final price of the product is at most fair. So the company's reputation is still not threatened here.

(B) Correct because if customers wonder how on earth will this company still make a profit, it's probably because the company plans to mass sell its new product. so that can financially justify the company's decision to go ahead with this strategy.

(C) We don't know whether there was a computational error. Nothing like that was mentioned in the argument.

(D) We don't even know what is the task of this product. All we know about this product is that it's new and it's markup will be increased at a higher rate than usual.

(E) We don't know how similar is this new product to the company's other previous products.


so answer must be B.
Manager
Manager
avatar
Joined: 12 Jun 2008
Posts: 82
Followers: 1

Kudos [?]: 2 [0], given: 0

Re: Zumit CR 005 [#permalink] New post 11 Sep 2008, 07:44
B
Retired Moderator
User avatar
Joined: 18 Jul 2008
Posts: 994
Followers: 9

Kudos [?]: 90 [0], given: 5

Re: Zumit CR 005 [#permalink] New post 11 Sep 2008, 07:50
A.
Director
Director
avatar
Joined: 20 Sep 2006
Posts: 658
Followers: 2

Kudos [?]: 68 [0], given: 7

Re: Zumit CR 005 [#permalink] New post 11 Sep 2008, 09:47
Clear A
Senior Manager
Senior Manager
User avatar
Joined: 29 Mar 2008
Posts: 350
Followers: 4

Kudos [?]: 51 [0], given: 0

Re: Zumit CR 005 [#permalink] New post 11 Sep 2008, 21:20
(A) for me because:
The cost to manufacture is very less and and also if the company wants to sell the product, they have to increase the mark up which is bound to increase the profit. Since the company's reputation is built on fair prices and modest profits, the company will encounter difficulties in trying to set a price for its newest product that will promote sales without threatening to compromise the company’s reputation.
_________________

To find what you seek in the road of life, the best proverb of all is that which says:
"Leave no stone unturned."
-Edward Bulwer Lytton

Manager
Manager
avatar
Joined: 31 Jul 2006
Posts: 241
Followers: 3

Kudos [?]: 27 [0], given: 0

Re: Zumit CR 005 [#permalink] New post 11 Sep 2008, 22:20
B for me
Senior Manager
Senior Manager
User avatar
Joined: 29 Sep 2009
Posts: 396
Location: Ann Arbor, MI
Schools: ROSS PT 2012
WE 1: Mech Engineer - General Electric - 2yrs
WE 2: Lead Mech Engineer - Ingersoll Rand - 4 yrs
Followers: 2

Kudos [?]: 25 [0], given: 5

Re: Zumit CR 005 [#permalink] New post 14 Dec 2010, 13:50
Contenders:
B: Incorrect because nothing is mentioned about the profit level
E: Nothing is mentioned about their production processes being ingenuous.

A is the correct answer(But I am concerned with level of certainty intended by "will")

Source of this question: GMAT Paper based test and the OA is A.
Manager
Manager
avatar
Joined: 02 Oct 2010
Posts: 159
Followers: 2

Kudos [?]: 11 [0], given: 29

Re: Zumit CR 005 [#permalink] New post 19 Dec 2010, 21:15
handikap wrote:
B



Its B sure...
Expert Post
Veritas Prep GMAT Instructor
User avatar
Joined: 16 Oct 2010
Posts: 5031
Location: Pune, India
Followers: 1208

Kudos [?]: 5816 [0], given: 168

Re: Zumit CR 005 [#permalink] New post 20 Dec 2010, 12:22
Expert's post
dancinggeometry wrote:
Mechanicorp’s newest product costs so little to make that it appears doubtful the company will be able to sell it without increasing the markup the company usually allows for profit: potential clients would simply not believe that something so inexpensive would really work. Yet Mechanicorp’s reputation is built on fair prices incorporating only modest profit margins.

The statements above, if true, most strongly support which of the following?

(A) Mechanicorp will encounter difficulties in trying to set a price for its newest product that will promote sales without threatening to compromise the company’s reputation.
(B) Mechanicorp achieves large annual profits, despite small profits per unit sold, by means of a high volume of sales.
(C) Mechanicorp made a significant computational error in calculating the production costs for its newest product.
(D) Mechanicorp’s newest product is intended to perform tasks that can be performed by other devices costing less to manufacture.
(E) Mechanicorp’s production processes are designed with the same ingenuity as are the products that the company makes.


Since we have multiple answers for this question, let us analyze it.

We are looking for 'the statements above support which of the following' so basically for the statement that can be inferred from the given premises i.e. for the conclusion. Remember, a conclusion never gives us new information. It only re-states what is mentioned in the premises.

Premises:
1. Newest product costs very little to make
2. It appears doubtful the company will be able to sell it without increasing the markup the company usually allows for profit (lets say the company marks up its goods by 20% to allow for profit - it will need to increase this %) because potential clients would simply not believe that something so inexpensive would really work.
3. Mechanicorp’s reputation is built on fair prices incorporating only modest profit margins.

So the new product costs very little to produce but the company will be unable to sell if it takes a modest profit because customers will not believe that a cheap product can work. To promote sales, it will have to take a higher profit margin. If the company does take a bigger profit, its reputation (of fair prices and modest margins) will be at stake.

(A) Mechanicorp will encounter difficulties in trying to set a price for its newest product that will promote sales without threatening to compromise the company’s reputation.


This is what we can infer from the premises. Hence it is the correct option.


(B) Mechanicorp achieves large annual profits, despite small profits per unit sold, by means of a high volume of sales.

We do not know whether it achieves large annual profits. We only know that it makes modest profits per product. Overall whether its profits are modest or large, premises do not tell us. They also do not tell us whether the company has high volumes of sales. Hence this is not something we can infer from the argument.
_________________

Karishma
Veritas Prep | GMAT Instructor
My Blog

Save $100 on Veritas Prep GMAT Courses And Admissions Consulting
Enroll now. Pay later. Take advantage of Veritas Prep's flexible payment plan options.

Veritas Prep Reviews

Re: Zumit CR 005   [#permalink] 20 Dec 2010, 12:22
    Similar topics Author Replies Last post
Similar
Topics:
Mechanicorp s newest product costs so little to make that it abhi758 15 16 Oct 2009, 12:18
Mechanicorp s newest product costs so little to make that it nitya34 11 18 Mar 2009, 23:29
Mechanicorp s newest product costs so little to make that it tarek99 5 10 Jan 2008, 06:39
Mechanicorp s newest product costs so little to make that it ayushi 8 01 Nov 2006, 16:06
Mechanicorp s newest product costs so little to make that it razrulz 11 09 Feb 2006, 22:00
Display posts from previous: Sort by

Mechanicorp s newest product costs so little to make that it

  Question banks Downloads My Bookmarks Reviews Important topics  


GMAT Club MBA Forum Home| About| Privacy Policy| Terms and Conditions| GMAT Club Rules| Contact| Sitemap

Powered by phpBB © phpBB Group and phpBB SEO

Kindly note that the GMAT® test is a registered trademark of the Graduate Management Admission Council®, and this site has neither been reviewed nor endorsed by GMAC®.