Clarifying the meaning of Choice C
gmatacer40 wrote:
GMATNinja
You have mentioned "So even though orders were unusually low last year summer". However, I am not able to deduce this specific information from the argument. According to me, if we take option C as true, it would talk about only fall quarter. So, we dont know whether orders were lw for summer quarter. please explain.
Choice (C) reads:
Quote:
(C) The distributors most likely to qualify for the manufacturer's special discount are those whose orders were unusually low a year earlier.
Choice (C) does not specify a particular quarter. It tells us about orders placed
a year earlier than whatever orders are being considered at a given moment. So we will accept this statement as true for summer and fall, and we'll count one year back from either quarter.
Choice B vs. Choice E
vasuca10 wrote:
Experts
mikemcgarry GMATNinja VeritasPrepKarishma egmat Please guide for this question.......
Let's take one more look at the argument:
Quote:
An eyeglass manufacturer tried to boost sales for the summer quarter by offering its distributors a special discount if their orders for that quarter exceeded those for last year's summer quarter by at least 20 percent. Many distributors qualified for this discount. Even with much merchandise discounted, sales increased enough to produce a healthy gain in net profits. The manufacturer plans to repeat this success by offering the same sort of discount for the fall quarter.
Conclusion: Offering the kind of discount that resulted in more net profits during the summer will achieve a similar gain in net profits in the fall.Here's how the author reaches this conclusion:
- During the summer quarter, the manufacturer offered a discount to distributors whose orders exceeded their orders from one year prior by at least 20%.
- Many distributors qualified for this discount. In other words, many distributors ended up ordering 20%+ more than they had one year prior.
- This increase in orders resulted in a healthy gain in net profits for the manufacturer.
- Therefore, repeating this discount in the fall will result in a similar increase in orders, which will result in a similar gain in net profits.
When breaking down the logic, two things jump out at me:
- "sales" = "orders" in this argument. The only business relationship discussed is that between the manufacturer and distributors buying from the manufacturer.
- The argument never explains why the distributors were attracted to the discount. Were these distributors really low on inventory as a result of a great spring quarter? Were the distributors excited by the chance to stock up in advance, at a discounted price? Were summer sales to the distributors' customers unusually high? We don't have a very good understanding of what motivates distributors to take advantage of the summer offer.
Quote:
Which of the following, if true, most clearly points to a flaw in the manufacturer's plan to repeat the successful performance of the summer quarter?
Because we do not know the exact motivations of the distributors, we have a gap in logic that is painful to look at. We'd really, really like to get rid of that gap.
But let's keep in mind that the argument pertains to
distributors who order merchandise from the manufacturer, and we're particularly concerned with whether distributors
will increase their orders in the Fall quarter. Filling the gap in logic for why summer orders increased would be very satisfying, but the best answer choice will
weaken the manufacturer's prediction about
fall orders by distributors.
Quote:
(B) Along with offering special discounts to qualifying distributors, the manufacturer increased newspaper and radio advertising in those distributors' sales areas.
vasuca10 wrote:
I marked Option B as increased newspaper and advertising costs shall have a direct impact on net profit which is not considered in the argument.
AprajitaG wrote:
B- If the manufacturer had put inputs other than the discounts then they might have had an impact on sales & hence we cannot assume that the same similar growth in sale will happen in fall quarter- given that it is specified that manufacturer plans to repeat the same discount but is not mentioned that other inputs will also be repeated
Yes, choice (B) does identify another possible factor contributing to the increase in summer orders. But why can't we assume that the manufacturer will continue spending on advertising in these sales areas, especially since it seemed to work so well in the summer? Unless we are the told that the manufacturer has decided
not to repeat this advertising spend, then it's still on the table for the fall. This choice gives us information about a tactic that could actually
help the manufacturer repeat its success, not a flaw that would weaken the manufacturer's prediction. That's why we eliminate (B).
Quote:
(E) The distributors' ordering more goods in the summer quarter left them overstocked for the fall quarter.
AprajitaG wrote:
E- The distributors are overstocked for fall, but might choose to be even more overstocked. It might not necessarily result in failure of the plan.
Choice (E) cuts to the heart of the business relationship: how much will the distributors decide to order from the manufacturer? Furthermore, (E) is the
only choice that gives us a concrete reason why distributors
would not increase their orders in the fall. If they have plenty of stock, then it follows logically that they won't need to order more.
Even if we can think of a reason why distributors would continue buying, that hypothetical reason would not nullify what we're told in choice (E), which we must accept as true. If your stock is already overflowing, you
probably won't be motivated to take advantage of the fall offer and further increase your stock.
Does this
prove that the plan will fail? No, but (E) clearly points to a
flaw in the plan and lowers our confidence that the plan will lead to an increase in net profits. That's why it's the
best choice.
I hope this helps!
close
04 May 2007, 12:06
15%
(02:11)
wrong 
We need more details. So, Incorrect.
