Around the World in 80 Questions (Day 4): A company has two divisions

Question

A company has two divisions: a food division and a non-food division. While the food division was profitable last year, the non-food division lost money. However, since the food division was bigger, in terms of revenue, than the non-food division, the company as a whole must have been profitable last year.

Which of the following statements about last year, if true, most strengthens the above argument?

Which of the following statements about last year, if true, most strengthens the above argument?

A. The food division made more revenue per unit sold than the non-food division.

B. The proportion of revenues generated in the last six months of the year was much greater for the food division than for the non-food division.

C. None of the products sold by the food division were sold at a loss.

D. The food industry was much more profitable last year than it had been the previous year.

E. The profit per dollar of revenue for the food division was equal to the loss per dollar of revenue for the non-food division.

Bunuel · Accepted Answer

Target Test Prep Official Explanation:

The conclusion of this argument is that “the company as a whole must have been profitable last year.”

The support for that conclusion is that the food division was profitable last year and that the food division was bigger, in terms of revenue, than the non-food division.

The correct answer will help to confirm that the conclusion is correct.

(A) The food division made more revenue per unit sold than the non-food division.

This choice may appear to help confirm the conclusion, but it actually makes no difference. All this choice indicates is that the prices of items sold by the food division were higher than the prices of items sold by the non-food division.

That information doesn’t indicate anything new about profitability since price alone doesn’t indicate how profitable sales were.

(B) The proportion of revenues generated in the last six months of the year was much greater for the food division than for the non-food division.

This choice has no effect on the argument. We already know that, for the year as a whole, the food division was profitable and the food division was bigger, in terms of revenue, than the non-food division.

The information about what occurred in the last six months of the year doesn’t change the support for the conclusion, which is about “last year” as a whole.

(C) None of the products sold by the food division were sold at a loss.

This choice may appear to strengthen the argument, but it actually changes nothing. After all, we already know that the food division was profitable, and the fact that none of the products it sold were sold at a loss doesn’t indicate how profitable it was. After all, products not sold at a loss could be sold at breakeven prices or at a very small profit.

(D) The food industry was much more profitable last year than it had been the previous year.

This choice presents an irrelevant comparison. The fact that the food industry was more profitable last year than the previous year does not mean that the particular company in question was profitable.

(E) The profit per dollar of revenue for the food division was equal to the loss per dollar of revenue for the non-food division.

Correct Answer

This choice proves conclusively that the company was profitable last year.

After all, if, as the passage says, the food division generated more revenue than the non-food division and, as this choice says, the profit per dollar of revenue for the food division was equal to the loss per dollar of revenue for the non-food division, then the company must have been profitable. After all, if the food division made as much per dollar of revenue as the non-food division lost and also generated more revenue, then the food division offset all the losses of the non-food division and also made more profits as well.

We can illustrate this idea with a simple example.

Food Division: 
Revenue - 1000
Profit Per Dollar of Revenue - 30
Total Profit - 300

Non-Food Division: 
Revenue - 500
Loss Per Dollar of Revenue - 30
Total Loss - 150

So, the food division’s profit of 300 less the non-food division’s loss of 150 leaves a net profit of $150.

Answer: E

nivivacious · Answer

A. The food division made more revenue per unit sold than the non-food division.
Incorrect. It doesn't provide information about the overall profitability of the company.

B. The proportion of revenues generated in the last six months of the year was much greater for the food division than for the non-food division.
Incorrect. It doesn't tell us about the overall profitability of the company.

C. None of the products sold by the food division were sold at a loss.
Although this strengthens the argument, E strengthens the argument more.

D. The food industry was much more profitable last year than it had been the previous year.
Incorrect. It tells us that the food industry was more profitable, but it doesn't tell us about the profitability of the company in question.

E. The profit per dollar of revenue for the food division was equal to the loss per dollar of revenue for the non-food division.
Correct. If the profit per dollar of revenue for the food division was equal to the loss per dollar of revenue for the non-food division, and the food division had more revenue, then the company as a whole would have been profitable

Jarvis07 · Answer

The argument states that the company as a whole must have been profitable last year because the food division was profitable and the food division was bigger, in terms of revenue, than the non-food division. Statement A is not relevant to the argument because it compares revenue per unit sold between the two divisions. The argument is about the overall profitability of the company, not the profitability per unit sold. Statement B is not relevant to the argument because it compares the proportion of revenues generated in the last six months of the year between the two divisions. The argument is about the overall profitability of the company, not the profitability in the last six months of the year. Statement C is not relevant to the argument because it states that none of the products sold by the food division were sold at a loss. This means that the food division made a profit on every product it sold, which is already implied by the fact that the food division was profitable. Statement D is not relevant to the argument because it compares the profitability of the food industry last year to the profitability of the food industry the previous year. The argument is about the profitability of the company last year, not the profitability of the food industry. Statement E is the most relevant statement because it states that the profit per dollar of revenue for the food division was equal to the loss per dollar of revenue for the non-food division. This means that the food division made a profit on every dollar of revenue it generated, while the non-food division lost a dollar on every dollar of revenue it generated. This means that the company as a whole must have been profitable last year, because the food division's profits more than offset the non-food division's losses. Therefore, the answer is (E).

Flower_Child · Answer

Premise  : A company has two divisions: a food division and a non-food division. 
While the food division was profitable last year, the non-food division lost money.

Conclusion  : Since the food division was bigger, in terms of revenue, than the non-food division, the company as a whole must have been profitable last year.

We need an information that will strengthen the conclusion that the company was overall profitable last year.
One key thing to note here is that profit is different from revenue.
Revenue = total sales of the company
Profit = Revenue - Cost

A. The food division made more revenue per unit sold than the non-food division.
 Incorrect.  Even if the food division made more revenue than non- food division , we can't say that the food division was more profitable since we don't know the cost incurred by each of the departments. Thus this choice does not affect the conclusion made in the argument.

B. The proportion of revenues generated in the last six months of the year was much greater for the food division than for the non-food division.
 Incorrect.  Again, as discussed above, unless we know the cost incurred by each of the departments we cannot comment about their profitablility and thus this choice does not affect the conclusion made in the argument.

C. None of the products sold by the food division were sold at a loss.
 Incorrect.  This choice just rephrases the information that is already available in the passage. It is already mentioned that  food division was profitable last year . So, this choice does not give any new information that can strengthen the conclusion.

D. The food industry was much more profitable last year than it had been the previous year.
 Incorrect.  This choice looks similar to choice A and B but is indeed much different. Even then, it is incorrect since it talks about the food industry in general and not about the company. Thus this choice does not affect the conclusion made in the argument.

E. The profit per dollar of revenue for the food division was equal to the loss per dollar of revenue for the non-food division.
 Correct.  This statement means that if the revenue of both the division had been same , then the profit from food division would have balanced out the loss from nonfood division. But since we are given that  the food division was bigger, in terms of revenue  we can say that overall profit was greater than overall loss and thus the company was overall profitable.

vishal_gupta · Answer

A company has two divisions: a food division and a non-food division. While the food division was profitable last year, the non-food division lost money. However, since the food division was bigger, in terms of revenue, than the non-food division, the company as a whole must have been profitable last year.

Which of the following statements about last year, if true, most strengthens the above argument?

Which of the following statements about last year, if true, most strengthens the above argument?

A. The food division made more revenue per unit sold than the non-food division.

B. The proportion of revenues generated in the last six months of the year was much greater for the food division than for the non-food division.

C. None of the products sold by the food division were sold at a loss.

D. The food industry was much more profitable last year than it had been the previous year.

E. The profit per dollar of revenue for the food division was equal to the loss per dollar of revenue for the non-food division.

A. The food division made more revenue per unit sold than the non-food division.  (We need to find the margin of profit for food division and loss for non-food division, revenue indicates only the price at which a particular item is sold. From this statement we cannot find the total profit made by the company and hence we are not in a position to say anything about the profitability of the company.)

B. The proportion of revenues generated in the last six months of the year was much greater for the food division than for the non-food division.  (Again talking about revenue)

C. None of the products sold by the food division were sold at a loss.  (The product might have been sold at a tiny amount of margins at food division while a significant amount of loss might have occurred at non food division)

D. The food industry was much more profitable last year than it had been the previous year.  (Still doesn't help us to evaluate the whether the company was profitable of this year)

E. The profit per dollar of revenue for the food division was equal to the loss per dollar of revenue for the non-food division.  ( Correct . Since the revenue for food division was more than no food division and the profit per dollar of revenue for the food division was equal to the loss per dollar of revenue for the non-food division, therefore overall the company must be in profit. Hence it strengthen the argument)

missionmba2025 · Answer

Tricky one !

We know that the food division has higher revenue , the author uses this fact to support her conclusion "the company as a whole must have been profitable last year". Hence, an assumption made to arrive at the conclusion is that the food division was able to compensate the loss made by non food division.

A. The food division made more revenue per unit sold than the non-food division.

This is a trap. We don't know the expense per unit sold. More revenue is not equal to more profit. Hence we can eliminate this.

B. The proportion of revenues generated in the last six months of the year was much greater for the food division than for the non-food division.

Irrelevant and distorted information. We are looking at the entire years data.

C. None of the products sold by the food division were sold at a loss.
 
I had parked this in my first read. We still don't know if the profit from food division was able to compensate the loss from the non food division.

D. The food industry was much more profitable last year than it had been the previous year.

Out of scope. The passage is not interested in what happens to the industry as whole.

E. The profit per dollar of revenue for the food division was equal to the loss per dollar of revenue for the non-food division.

Way better than C. We are given that the per dollar revenue was equal to the per dollar loss. AS the revenue of food industry is higher, the difference results in profit.

IMO E

DG1989 · Answer

A company has two divisions: a food division and a non-food division. While the food division was profitable last year, the non-food division lost money. However, since the food division was bigger, in terms of revenue, than the non-food division, the company as a whole must have been profitable last year.

Which of the following statements about last year, if true, most strengthens the above argument?

Which of the following statements about last year, if true, most strengthens the above argument?

A. The food division made more revenue per unit sold than the non-food division.

B. The proportion of revenues generated in the last six months of the year was much greater for the food division than for the non-food division.

C. None of the products sold by the food division were sold at a loss.

D. The food industry was much more profitable last year than it had been the previous year.

E. The profit per dollar of revenue for the food division was equal to the loss per dollar of revenue for the non-food division.

Per given information:
1. There are 2 divisions in a company: Food division and Non-Food division
2. Food division was profitable last year and the Non-Food division lost money
3. Revenues of Food division > Revenues of Non-food division

Conclusion :   Since the food division was bigger, in terms of revenue, than the non-food division, the company as a whole must have been profitable last year.

Let's do some pre-thinking here:

Profits = Revenue - Expenses
and Loss = Expenses - Revenues

No we know that Food division was profitable while Non-Food division incurred loss.
Thus in order for company to be profitable, the difference between the profit and loss should be in positive i.e. Net profit of food division > Net loss of non-food division and one the given options should provide this evidence to  STRENGTHEN  the conclusion drawn.

Let's look at the options:
A. The food division made more revenue per unit sold than the non-food division.
 This information is already given. Revenues of Food division > Revenues of Non-food division.  INCORRECT

B. The proportion of revenues generated in the last six months of the year was much greater for the food division than for the non-food division.
 This again talks about revenues that tells nothing about the profits. Higher revenue doesn't necessarily translate to higher profits.  INCORRECT

C. None of the products sold by the food division were sold at a loss.
 This information is irrelevant as we already know that Food division was profitable. Whether each product was sold at profit doesn't change the final outcome.  INCORRECT

D. The food industry was much more profitable last year than it had been the previous year.
 This is a trap choice as it compares the two profits of food division from two different years. This doesn't give any evidence about the overall profitability of the company when both divisions are considered.  INCORRECT

E. The profit per dollar of revenue for the food division was equal to the loss per dollar of revenue for the non-food division.
 This choice is in line with our pre-thinking and provides the evidence we were looking for.

Since the profit per dollar of revenue for food division = loss per dollar of revenue for non food division, say 50 cents per dollar.
Also Revenues of Food division > Revenues of Non-food division say,
Food division revenue = 10 million USD
Non - Food division revenue = 5 million USD
Then Profit = 5 million USD
Loss = 2.5 million USD
Difference = 5 million USD - 2.5 million USD = 2.5 million USD net profit.

Hence the company will be profitable.  CORRECT

TargetKellogg2024 · Answer

A company has two divisions: a food division and a non-food division. While the food division was profitable last year, the non-food division lost money. However, since the food division was bigger, in terms of revenue, than the non-food division, the company as a whole must have been profitable last year.
 
Which of the following statements about last year, if true, most strengthens the above argument?

A. The food division made more revenue per unit sold than the non-food division.
 This option is about revenue per unit sold. While this is a relevant measure of profitability, it is not as important as profit per dollar of revenue. This is because profit per dollar of revenue tells us how much money the company is making on each sale, while revenue per unit sold only tells us how much money the company is making from each unit sold.

B. The proportion of revenues generated in the last six months of the year was much greater for the food division than for the non-food division.
 This option is about the proportion of revenues generated in the last six months of the year. This information is not enough to say whether the company as a whole was profitable. This is because the company could have made a loss in the first six months of the year, which would have offset the profits made in the last six months.

C. None of the products sold by the food division were sold at a loss.
 This option is about whether any of the products sold by the food division were sold at a loss. While this information is relevant to the profitability of the food division, it is not relevant to the profitability of the company as a whole. This is because the company could have made a loss on other products, which would have offset the profits made on the food division's products.

D. The food industry was much more profitable last year than it had been the previous year.
 This option is about the profitability of the food industry as a whole. This information is not relevant to the profitability of the company in question. This is because the company's profitability could be different from the profitability of the food industry as a whole. For example, the company could be more efficient than other companies in the food industry, which would lead to higher profits.

E. The profit per dollar of revenue for the food division was equal to the loss per dollar of revenue for the non-food division.
 This statement strengthens the argument because it shows that the food division was not just more profitable than the non-food division in terms of total revenue, but also in terms of profit per dollar of revenue. This means that the food division was not just making more money, but it was also making more money on each sale.

BottomJee · Answer

Let Revenue, Cost & Profit of Food division be R, C & P respectively. 
Let Revenue, Cost & Profit of Non-Food division be R', C' & P' respectively.
so, P = R- C & P' = R'- C'

Premise:-   
a. P is +ve while P' is -ve
b. R > R'

Conclusion:-  P+ P' = +ve

We don't know whether C> C' or C < C'.

We are not aware of C & C' for the last six months and also data related to first six months is missing. Hence, conclusion for the whole year cannot be inferred.

Total profit and loss of each division is missing. Profitability of a company cannot be calculated on per product basis when we are not aware of the no. of products sold in each division and also the magnitude of profit and loss per product for each division is not mentioned.

Scope issue.  Data related to last year is of no help to assess relation between two divisions in the current year.

This means that for every dollar of revenue at Food division resulted in P cents profit whereas for every dollar of revenue at Non-Food division resulted in -P = P' cents profits.
Therefore, if R > R
then P > |P'|
Hence, P + P' = +ve.
 IMO OA should be E.

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Around the World in 80 Questions (Day 4): A company has two divisions

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