imhimanshu wrote:
Last August the XT chain of gasoline stations had a temporary sales promotion in effect. In the promotion, any customer who made a purchase of ten or more gallons of gasoline was entitled to a free car wash. For the month of August, XT experienced a ten percent increase in gasoline sales as compared to sales in August the previous year, so evidently the promotion was successful as a means of boosting sales.
In evaluating the argument, it would be most helpful to answer which of the following?
(A) In the areas in which XT’s gasoline stations operate, how did total combined gasoline sales for all gasoline stations last August compare with sales for the previous August?
(B) Was the money that XT earned from the increase in gasoline sales enough to offset the cost of providing free car washes during the promotion?
(C) Were there any customers who bought ten or more gallons at an XT gasoline station during the promotion who would have bought gasoline at the same station in lower quantities, but more frequently, if the promotion had not been in effect?
(D) Did XT or any of its gasoline stations have to pay other businesses to provide the car washes that customers were offered in the promotion?
(E) Are XT’s gasoline sales in August usually significantly higher than one twelfth of XT’s annual gasoline sales?
When I see this many incredibly boring words, I
(1) list the factual premises more specifically (I always take notes); and
(2) If I am down to two answers, in those two options I look even more carefully than usual for key words.
• THE PROMPTFact #1: Last August the XT chain of gas stations had a temporary sales promotion
Fact #2: Promotion = IF customer bought 10+ gallons of gas, customer got a free car wash
Fact #3: Last August, XT [stations] had a 10% increase in SALES compared to SALES during the previous August
Conclusion: The promotion "evidently" boosted sales
When I reached the conclusion, I went back and circled SALES in my notes.
Questions that involve one issue in business accounting almost always try to sneak in other accounting issues.
What is the issue? What do we not know?We do not know whether the promotion caused the increase in sales.Correlation is not causation.
Other things could explain August #2's 10% increase in sales.
Maybe in August #2, the public transportation system broke down so people had to drive more.
Maybe in August #2, an amazing circus was in town and lots of people came from other places to see the circus.
What information would help the most to tell us whether the sales promotion caused the increase in sales?
• Things to keep in mind
-- August vs. August is important
-- we care about one thing: which information pertains to whether the promotion caused the sales increase. All else is distraction.
• OPTIONSQuote:
(A) In the areas in which XT’s gasoline stations operate, how did total combined gasoline sales for all gasoline stations last August compare with sales for the previous August?
-- I cannot eliminate this answer quickly. I am looking for 4 wrong answers, not one correct answer. KEEP.
Quote:
(B) Was the money that XT earned from the increase in gasoline sales enough to offset the cost of providing free car washes during the promotion?
Trap. Irrelevant. This answer has something to do with profit and loss. Eliminate.
-- The conclusion asks
nothing about whether XT turned a profit. The prompt says nothing about profit.
The issue is: Did the promotion cause the sales increase?
Quote:
(C) Were there any customers who bought ten or more gallons at an XT gasoline station during the promotion who would have bought gasoline at the same station in lower quantities, but more frequently, if the promotion had not been in effect?
Much too vague.
Wow, this one is bad.
First, nothing in this option indicates that sales increased at all, let alone because of the promotion.
-- if people who bought 10+ gallons would have bought, theoretically, fewer gallons more frequently,
that fact suggests that they would have bought the same total amount of gas.
Second, this data has too much uncertainty.
This data is focused on hypothetical buying patterns that do not show a real-world 10% increase in sales.
The quantity words look tempting. They are too vague to be helpful.
Customers who would have bought lower qualities more frequently sound as though they are customers who did not increased total monthly gas purchase.
lower quantities more frequently = probably the same total amount of gas purchased.
Second, what does ANY customers mean?
Customer buying patterns might have changed, but nothing says that all of them
increased their purchase of total gallons by 10%.
When we see vague quantity words such as
any, lower, or
more frequently, we should ask: do I know anything specific?
-- What is ANY [customers]? A majority? 100% of them?
-- What are LOWER quantities? A lot lower? A little bit lower? There are thousands of possibilities.
-- What is MORE FREQUENTLY? A few times a week? One time more than usual? Again, thousands of possibilities.
ANY is a key word, as are the other capitalized key words.
We have no actual quantities and no guarantee that we will have comparative quantities.
For those who struggled between A and C, one word in option A really helps ("all"),
and these three words in C really do
not help.
Quote:
(D) Did XT or any of its gasoline stations have to pay other businesses to provide the car washes that customers were offered in the promotion?
Irrelevant. Neither the prompt nor the conclusion mentions costs.
Does this option tell us anything about whether the promotion increased the sales? Nope. Eliminate
Quote:
(E) Are XT’s gasoline sales in August [which August?] usually significantly higher than one twelfth of XT’s annual gasoline sales?
Neither the prompt nor the conclusion mentions average sales.
We need an August #2 compared to August #1. Average sales do not matter. August #1 and August #2 matter. Eliminate.
I am left with (A).
Quote:
(A) In the areas in which XT’s gasoline stations operate, how did total combined gasoline sales for all gasoline stations last August compare with sales for the previous August?
Ah. ALL gas stations = XT gas stations plus all OTHER non-XT gas stations
What happened to sales at the other gas stations during August #1 vs. August #2?
-- If other gas stations also experienced a 10% sales increase, then the XT promotion had no effect. Sales increased 10% everywhere.
-- If the other gas stations experienced no increase (no change) in sales, then the promotion almost certainly had an effect. (What else explains why ONLY XT gas stations had a 10% increase in sales?)
-- If the other gas stations experienced a decrease in sales, then the promotion almost certainly had an effect—same as above, but maybe the promotion even tempted customers away from other stations.
Option A would give us an answer we could use to evaluate the issue in the conclusion.
Answer A. _________________
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